Preamble

The House met at Ten o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Intensive Care (London)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Burns.]

Mr. Roger Sims: First, I thank you, Madam Speaker, for the opportunity to have this debate, and the manner in which you responded to my application.
Just before 11 pm on 6 March, the London ambulance service was called to an incident in Orpington, where the ambulance crew found my constituent, Mr. Malcolm Murray, lying unconscious with severe head injuries. He was admitted immediately to Queen Mary's hospital, Sidcup, which lies within the constituency of my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath).
The senior house officer, an experienced and able clinician, concluded that the patient needed neurosurgery, and efforts were immediately initiated to find an intensive care bed where he could receive such treatment. None could be located in the London area, so the search was extended further afield, and eventually Leeds general infirmary agreed to accept the patient. Speed in transferring him was of the essence, but the London helicopter medical service does not operate at night, so the Royal Air Force was called in. It picked up Mr. Murray from Queen Mary's by helicopter at 6.30 am, and he arrived at Leeds at 8.15 am. Sadly, the patient did not survive.
Medical opinion is that it is most unlikely that any treatment, wherever it was given, could have saved Mr. Murray, but the incident attracted nationwide comment and concern. Naturally, the concern was particularly strong in the neighbourhood in which Mr. Murray lived. The incident in which he suffered the injury has led to a man being charged with murder. It is not difficult to imagine how the tragedy has affected his girl friend, Teresa Davy, and his many friends, and their distress was compounded by the difficulty in securing proper treatment for him. Ms Davy and others mounted a campaign and drew up a petition that attracted more than 4,000 signatures. She came to see me at my advice bureau expressing determination that action should be taken to prevent a repetition of those events.
Miss Davy's reactions and those of others in my constituency and further afield were fully justified. We are all entitled to expect that, should we suffer sudden illness or accident and need intensive care, we shall get it.
In the aftermath of the incident, inquiries into it and its implications were set up by both the regional health authority and Queen Mary's hospital trust. On 23 March,

the hon. Member for Woolwich (Mr. Austin-Walker) initiated a brief Adjournment debate on neurosurgery, in the course of which he referred to this case. But at that stage, full details were not known, and the reports had not yet been published. A few days later, they were, and they made various recommendations and raised a number of issues, referring mainly to the availability of facilities.
Both reports speak well of the care that Mr. Murray received at Queen Mary's hospital and of the staff there, with one exception. They are unfairly critical of the consultant orthopaedic surgeon, Mr. Anthony Percy, who also happens to be my constituent. Mr. Percy's treatment is an aspect of the case about which I know my right hon. Friend the Member for Old Bexley and Sidcup feels particularly strongly. I shall confine myself to saying that statements made by the region and the trust, and comments in the media, about Mr. Percy were, in my view, grossly unfair, and have damaged his clinical reputation. I hope that the Minister will take this opportunity of putting the record straight.
One matter that obviously needs clarification is exactly how many intensive care beds there are in London—by which I mean broadly that area within the M25. Following an exchange on the radio with the hon. Member for Newcastle upon Tyne, East (Mr. Brown), in which he claimed that the number of intensive care beds in London had decreased in recent years and I said that they had increased, I tabled a parliamentary question and had an exchange of letters with my hon. Friend the Minister, whom I am glad to see in his place to respond to the debate.
This is not an issue on which we should seek to score party points with regard to statistics, but perhaps we might have clarification as to how many intensive care beds there are in London, as distinct from North Thames and South Thames regions, which cover a far wider area.
Having established that figure, I would then ask whether it shows that there is an adequate number of intensive care beds, and what formula is used for calculating how many are needed. Since March, there have been other similar cases of patients being transferred out of London, which certainly does not suggest that we have a surplus of intensive care beds.
A few weeks ago, I initiated a Wednesday morning debate on the future of Guy's hospital. I shall not rehearse that today, but I draw attention to the fact that Philip Harris house at the hospital has been planned and equipped, among other things, to accommodate 15 intensive care beds. Surely, far from now planning to use those spaces for other purposes, they should be brought into use as soon as possible.
The issues include not only the number but the type of beds. Not all intensive care beds are the same with regard to the equipment adjacent to them or the staff to service them.
Any one of us or our constituents might at any time suffer a heart attack, and the chances are that whatever hospital we were taken into in the London area would be able to treat that condition. However, if, for example, we were involved in a road accident and suffered head injuries necessitating neurosurgery, that would not necessarily be the case. Only a handful of hospitals can offer that treatment. Although, in theory, sufficient beds should be available to meet those likely needs, obviously there is a question whether there are sufficient. The Malcolm Murray case suggests that there are not.
The Department of Health is not short of advice on that matter. A report by the Society of British Neurological Surgeons published in February 1993 recommended that four neurosurgical intensive care beds should be available per million of the population. At present, in the whole of South Thames, there are nine beds for a population of 7 million—little more than one per million. The Brook general hospital, which has a catchment area of more than 3 million, had two intensive care beds.
I say "had", because the Brook unit has closed. The King's/Maudsley neuroscience centre is currently running at 40 beds short, as the new Ruskin wing has not yet been commissioned, and, although the surgeons from the Brook have been transferred to King's, they have yet to be allocated secretaries or operating space.
Commenting on his report on the Malcolm Murray incident, the chairman of the South Thames regional health authority said on television that there was no shortage of neurosurgical intensive care beds in London. Who is right—he or the surgeons? Does the Minister accept the Society of British Neurological Surgeons' report, and does he intend to take steps to implement its recommendations?
I have dwelt on neurosurgery, because it is so important, but similar considerations apply to other specialties. I ask again: is there any formula to decide how many intensive care beds we should have in London and the different types of beds there should be, and any policy as to where they should be situated?
Another general issue is how many intensive care beds should be used for routine surgery, and how many earmarked for emergency. I realise that there is a difficult balance to be struck in maintaining empty beds, and staff for them, at considerable cost for emergencies that may not arise, when the beds might be used for elective surgery such as bypass operations. Does the Department issue any guidelines on that?
I also suggest that there should be some clarity on where authority lies when hospital staff seek intensive care beds. In their report, the regional health authorities say:
In the Panel's view, greater senior clinical advice and direct involvement at Queen Mary's may well have been successful in securing a more flexible response from the hospitals contacted, notwithstanding the pressures they were experiencing.
That, of course, implies criticism of Mr. Percy, whom I have mentioned, and were the grounds on which he was censured. Indeed, in his covering letter to the Secretary of State, the chairman of the regional authority wrote:
The direct involvement of the senior clinician in obtaining a referral would have made a significant difference".
In fact, in subsequent correspondence with Mr. Percy, the trust has accepted that finding beds is a management responsibility.
In any case, if a clinician is considered sufficiently qualified and experienced to be in charge of a hospital accident and emergency department, surely his judgment should be accepted, regardless of his status in the hospital hierarchy. Indeed, paragraph 6 of the hospital's report says:
The clinical acceptance of referred patients should not depend upon the seniority of the referring clinicians".
That surely must be right, and I hope that the Minister can confirm that.
An extraordinary feature of that case was the amount of time that staff at the hospital had to spend simply trying to locate a bed. The conclusion that Mr. Murray needed a neurosurgery bed was reached just after midnight, and the hospital's report comments:
Chasing beds and securing transfer arrangements continued until 05.00 hours. That should not have been necessary and is unacceptable. The lack of any central reference point under such circumstances is a case for extreme concern.
To that we should all surely say, "Hear, hear," and it appears extraordinary that, when we now have so much sophisticated technology available to us, the only way that staff could find out if there was an empty bed was to telephone hospitals one by one.
The first recommendation in the region's report reads:
A register of intensive care beds availability across the Thames Regions should result in easier and better communication of bed availability. Work on this has already started and the register will be introduced in mid-April. The register will be able to be sourced by telephone and will be updated twice a day.
Can the Minister confirm that that system is now in place, and, if so, is it operating effectively?
Finally, can my hon. Friend confirm that the procedures to be followed in such cases as that have been clarified? Another of the region's recommendations was:
Commissioners must ensure that hospitals have and follow agreed intensive care bed management procedures and their initial review should be completed within three months.
That recommendation was made on 28 March, so the three months has now elapsed, and I hope that the reviews have been completed.
I hope that, in the course of the debate, the matter of the unwarranted criticism of my constituent Mr. Tony Percy will be resolved and that he will be cleared of the charges made against him.
Miss Davy and her friends were determined that whatever happened in the case of Malcolm Murray should not be allowed to happen again. I believe that they were perfectly entitled to make that demand. I hope that the Minister will give the assurances that they, and I, seek when he replies to the debate.

Mr. John Austin-Walker: I am sure that Labour Members would endorse all that the hon. Member for Chislehurst (Mr. Sims) has said. I share his views about the medical staff at Queen Mary's hospital, Sidcup, and I wish to be associated with his remarks in that regard.
I will not dwell upon the specific circumstances of the Malcolm Murray case and the events of that tragic night, because I dealt with it in the earlier debate to which the hon. Gentleman referred. The hon. Gentleman also set out those circumstances very clearly this morning.
However, I remind the House and the Minister of the tragic death of Roberta Gerardo on new year's day. I have nothing but praise for the medical and nursing staff at the North Middlesex hospital, but there was an eight-hour delay in finding an intensive care bed for that mother of two. There were telephone calls to hospitals as far away as Cambridge in an attempt to find a bed. One was eventually located 20 miles away in Hemel Hempstead, but, sadly, the case of Roberta Gerardo had the same tragic ending as that of Malcolm Murray.
The recent report of the Health Select Committee found that, for a number of years, the former Secretary of State had ignored all the signs of a crisis in the London


ambulance service. The Select Committee said that, if the political will had existed, the crisis could have been averted. I draw the Minister's attention to the existing crisis in the provision of intensive care facilities, not just in Greater London but, as the hon. Member for Chislehurst said, in the area within the boundaries of the M25.
There is sufficient evidence to show that it is not just a matter of an occasional crisis, such as the cases of Roberta Gerardo and Malcolm Murray. Night after night, hospital staff throughout the capital and beyond spend hours on the telephone trying to find appropriate facilities for patients whose lives are at risk.
The former Secretary of State accused Labour Members of being obsessed with the issue of hospital beds. But every time we asked the former Secretary of State and the Department of Health about the availability of beds and about hospital closures since 1979, she replied that the Department did not know. The Department of Health does not know how many beds have been lost, and it does not know how many hospitals have closed. The Department of Health does not collect details of the number of existing hospitals, let alone details of hospital closures.
Fortunately, the Library of the House of Commons has produced figures about the number of hospital beds available in London. I do not think that we can divorce the provision of acute services and acute beds from the crisis in the provision of intensive care facilities.
The Library data show that, between 1979 and 1993–94, the number of national health service beds in Greater London fell by 49 per cent., and the number of acute beds by 45 per cent. I know that the new Secretary of State has said that he does not intend to revisit the decisions of the former Secretary of State, but I urge him to re-examine the basis of the decisions to rationalise hospital services and to close beds in London.
We know that the Government are still pursuing the Tomlinson agenda. A recent survey showed that, in order to reach the Tomlinson targets and equalise with the rest of the country, 400 beds had to be lost in 1992–93. In fact, 1,499 beds were lost in that year.
The crisis goes across all emergency services. Hospital staff and consultants who provide acute care are spending inordinate amounts of time on the telephone trying to find beds, and we know that the same crisis exists in the mental health and psychiatric spheres. In my constituency, which has a bed occupancy rate of 120 per cent., patients must often be transported to facilities as far away as Oxford.
The calculation of the number of beds required in London is based upon the Tomlinson report and the subsequent report of the King's Fund. The Secretary of State must also examine the later report of the King's Fund entitled "London—the Key Facts", which was published in April 1994. It stated:
The Capital's health care needs have been underestimated. There are now good reasons for believing that London merits a larger—not smaller—share of the NHS cake".
Unless London receives an additional share of the cake, I do not believe that it can begin to address the acute needs of its communities and the problem of the shortfall in intensive care provision without damaging other areas of the health service. The King's Fund estimates that London needs an extra £200 million. If the York formula of resource allocation had not been tampered with, it is

likely that London would have received those funds already. However, the Government have adapted resource allocation which distorts the formula and takes resources away from areas of social need, such as London.
The hon. Member for Chislehurst referred to the closure of the Brook hospital—the hospital that should have taken Malcolm Murray but which did not have a bed available on that evening. As the hon. Gentleman said, the hospital is now closed. Service planners in the South Thames region say that a neuroscience unit requires five or six intensive care beds. At the time of Malcolm Murray's death, the King's site had two intensive care beds and the Brook had three.
It has now been decided to relocate the Brook unit to King's hospital. The services which are provided for the people of south-east London and north Kent—the area represented by the hon. Member for Chislehurst and the right hon. Member for Old Bexley and Sidcup (Sir E. Heath)—have been relocated in inner London. That area is close to the M2, the M20 and the M25, and the high incidence of road traffic accidents may result in the need for intensive care and neurosurgery services. It makes no sense to relocate those very important services further away from the area they are intended to serve and closer to central London.
The situation is the same north of the river in east London. The neuroscience facilities at Oldchurch hospital may be transferred to the Royal in inner London. For years, a threat has been hanging over St. George's trust and the world-renowned Atkinson-Morley hospital in south-west London. Moving specialist units and the intensive care facilities that go with them further into central London seems to fly in the face of the Government's original aim to move services out of the centre of London.
Although, in some ways, inner London may be over-supplied with acute services, the same is not true of Greater London as a whole and those constituencies on the periphery of London. It seems strange that the current practice should fly in the face of the Government's professed policy of allowing services to follow the patients. We now find patients chasing scarce resources and scarce beds.
No one has adequately explained to me or to my local community health council why the former Secretary of State took the decision to shoehorn the services at the Brook hospital into the King's Maudsley. The former Secretary of State ignored the fears, concerns and dissatisfaction expressed not only by my constituents but also by consultants involved in service provision.
The hon. Member for Chislehurst referred to the way in which the services have been shoehorned into the unit at King's with 44 Maudsley neurology beds, without easy access to medicine, surgery or intensive care.
The Secretary of State says that proximity to psychiatric services will be advantageous to the neurosciences. It would not have been advantageous in the case of Mr. Murray or most people requiring acute neurosurgery. There is no logical argument for locating neurosurgery services with psychiatry. They need to be located in a major trauma centre with intensive care facilities.
It would have been possible to transfer the services from the Brook, either to the new Queen Elizabeth hospital when the trust takes it over from the Ministry


of Defence, or alternatively, to Queen Mary's hospital in Sidcup, where it would have been perfectly placed to serve the sub-region for which it was designed.
There is chaos in the neurosciences following the closure of the Brook hospital, and I am particularly concerned about paediatrics. At the moment, the neurosciences are split; neurology is at the Maudsley, neurosurgery is at King's, and paediatric neurology is split between Guy's, St. Thomas's and King's. Paediatricians at Greenwich are now saying that they would prefer to send their patients to Great Ormond street, where all those services, including intensive care, are provided under one roof.
A worrying aspect of the report into the incident involving Malcolm Murray is the suggestion that perhaps the region should be looking at private facilities. Is that the route that the Government are taking? If there is sufficient supply of intensive care specialist facilities, why should the region and the trust have to look to the private sector?
The Minister talks about more effective bed management, saying that it is not a matter of the number of beds but how they are used. The hon. Member for Chislehurst said that there has to be a balance between keeping emergency beds open and using them for necessary, urgent and acute work. To my mind, that demonstrates the pressure on the acute beds and the inadequacy of provision to meet the demand for acute services. I also fear that what the Minister is saying may inevitably lead to the earlier discharge of critically ill patients than is clinically justifiable.
In the debate on 23 March on neurosurgery services in the south-east, the Minister referred to a meeting two days earlier between the Secretary of State and the royal colleges, the Intensive Care Society and the British Association of Critical Care Nurses to discuss the MacPherson report. He said that the meeting had been brought forward. I do not know whether that was because of my Adjournment debate or because of the tragic circumstances of Malcolm Murray, but it is worrying that it requires such a tragedy to spur the Secretary of State into action.
What was the result of that meeting, apart from the establishment of the steering group? What are the recommendations of that working group, and when is it likely to report to the House? I hope that the Minister will provide some answers to the questions that are being asked today, and that it will not require a further tragedy such as that of Malcolm Murray or Roberta Gerardo before the Government act to address the number of intensive care beds required to serve the capital city.

Sir Edward Heath: I am delighted that my hon. Friend the Member for Chislehurst (Mr. Sims) has had the opportunity of raising this subject today. I owe him and the House an apology for not being here for the first part of his speech, owing to traffic conditions entirely beyond my control. Since then, he has given me the opportunity of reading his speech, which I have done, and I thoroughly support everything he said.
As my hon. Friend knows, I should like to add one or two points. There are two major aspects of the problem that has been raised today. The first is the national one,

which concerns the facilities available for dealing with such cases. The second is the personal one concerning Mr. Percy, who is a constituent of my hon. Friend. He came to see me directly after the events, because Queen Mary's hospital is in my constituency, and that was where he became involved.
I shall first add a word to what my hon. Friend and Opposition Members have said about the provision of intensive care facilities in Britain under the health service. It is quite obvious that they are not sufficient. Today we are discussing two cases. One involved a patient in Maidstone who had to be driven to Southampton before a bed could be provided where he could have proper treatment. That cannot be a satisfactory state of affairs. In respect of Queen Mary's, as is well known, a patient had to be flown from Sidcup to Leeds by a helicopter that was specially commissioned from the Royal Air Force, and paid for by the Royal Air Force, before he could receive proper treatment.
There is general agreement among the medical profession at Queen Mary's and at Leeds that everything possible was done by the doctors involved. There is no question about that, so it is not the problem. The problem concerns the facilities where treatment can be provided.
We have just heard that the Brook hospital was immensely important for many decades. For as long as I have represented Old Bexley and Sidcup, there have been attempts to close down the Brook hospital, all of which were successfully resisted until the present one. We now have a case where the lack of facilities at the Brook hospital meant a flight from Sidcup to Leeds. The Brook hospital was telephoned, but as it was closing down, no facilities were available.
I have said previously that the reports that were produced in recent years on the hospital service, and the distinguished people who wrote those reports, dealt with everything except the patients. They have centralised everything for the benefit of the medicos and the administrators, but the fact that a patient, instead of being able to go to the Brook hospital, had to be flown to Leeds never crossed their minds. That is the essence of the matter as to the proper provision of such facilities.
The chairman of the region stated that there were ample facilities in the London area, but he is quite wrong. His comment must raise doubts whether he is suitable as a regional chairman. He said that beds were available at the Royal Free hospital that night. That is also untrue. The Royal Free was telephoned, and replied that there were no beds available. It has now said that, had a more senior person telephoned the hospital, a bed might have been available.
What philosophy or approach is it to say that a bed is available only to a top person who is said to be influential, but not if those on duty at the hospital and carrying out the work there apply for a bed? That cannot possibly be tolerated as an approach to service in our hospital system.
I am sure that the Secretary of State and the Minister would not for a moment suggest that such an approach can continue. The report produced by Queen Mary's, Sidcup, was very full, and made a number of suggestions that have been touched on by my hon. Friend the Member for Chislehurst. Like him, I hope that they will receive full consideration in the Department. The Minister may not be able to say at the moment whether they are all acceptable, and I quite understand that.
We now have a new Secretary of State for Health, who may have a different approach from his predecessor. He and the Minister might want to look at those suggestions. As far as I am concerned, the fuller the consideration they get the better, because a great deal of thought has gone into them and into what should be said and done about them. There are practical propositions, but the fact remains that beds with the equipment to deal with neurological cases are not available in London, and they are the basic necessity.
I now come to the personal position of the doctor involved at Queen Mary's. The matter has been handled deplorably. The first investigation, which was hastily rushed, was carried out by the chairman of the region, and three lay people. Not one was a medical person. It was said that they consulted a doctor, but what his qualifications are we do not know. Was he familiar with all the problems of this particular field of medicine?
The committee produced its report, and the chairman went on television and said that Dr. Percy had not only been criticised but condemned for his mistreatment of this case. The chairman was followed by the Secretary of State herself, who also said on television that the doctor had been condemned.
What sort of justice is that? They were three lay people, not in any way experts or experienced in these matters. What is more, the doctor himself was not invited to appear before them to give his account of what happened or to attempt to justify his actions. I cannot consider that that is possibly justifiable in any organisation, be it private or public, but least of all public.
To behave in that way is totally unacceptable, and I hope that it will be made clear to them and to all the other regions that, if doctors are going to be criticised in this acute way, the investigations have to be properly handled. The committee should include people who are experienced, and the people being considered should be invited to give evidence, as fully as they like, about their own position. Nothing else is possibly justifiable.
There was a leak of the report of the region. How it happened or where it came from we do not know. It has been denied by the region, but it led to a press attack on the doctor, of the most extreme kind. As the case is coming before the courts, I do not propose to say any more about it. It would be improper on my part, even though the House of Commons has special arrangements.
As a result of the leak, Dr. Percy has, in the minds of millions of people in this country and throughout the English-speaking world, been condemned for his conduct in this case. We all know when that happens how difficult it is for any person to wipe out what has appeared in the press in the most extreme form. That was the consequence of the leak.
The inquiry that was made by Queen Mary's took longer and was thorough, and all those involved, in addition to Dr. Percy, were invited to give evidence to it. They did so. In addition to making recommendations about the general situation, it also commented fairly fully about the doctors involved.
What is very important is that the people who were working that night in Queen Mary's were also described fully. In paragraph 12, the report says:
The Panel felt very confident that the team in place on the night in question were of a high calibre and sound experience. Indeed, ironically, if they had not been so experienced help may have been sought at an earlier stage.

There was no question about those who were in charge in the hospital. The senior doctor in charge had been at Queen Mary's for a comparatively short time, but was very experienced in the problems that arose that night. There was no criticism of him or of any of those who were working with him.
I am told that, altogether, a group of 15 hospital specialists worked on this case, all through the night, until they could get the RAF helicopter. My hon. Friend the Member for Chislehurst mentioned the administrative arrangements, which need to be improved, to get facilities for handling such cases. They did extraordinarily well to find out that, although other helicopters were not available, the RAF had one, and to get around the problems of paying the RAF, which, with limitations on Government expenditure in mind, wanted an assurance that it would get the cash quickly once the helicopter was used. There is room for improvement in the administrative arrangements as well.
We then come to the question of Dr. Percy and what he did. Let me quote again from the report:
It was the view of the Enquiry Panel that there were no grounds for criticism of the clinical supervision of the patient"—
no grounds.
However, once the call had been received by the consultant Orthopaedic Surgeon"—
Dr. Percy—
at 0217hrs he could have taken greater responsibility in helping the junior staff on site possibly by attending the hospital or by telephoning neurosurgical colleagues in specialist centres when it became clear that Leeds was the only option available.
There are two things about that. First, the panel says that Dr. Percy could have taken greater responsibility in helping junior staff, possibly by attending the hospital. In fact, he did what the junior staff asked. He was absolutely certain that the staff were doing their job properly after they reported to him, and advised them about getting in touch with hospitals where beds would be available. He later advised them on how to solve the transport problem. In that respect, he had done what was required, and had done it properly.
The report continues:
Nonetheless, at 0217hrs with a patient who clearly required specialist attention it is probably the case that the involvement of the consultant would not have made any difference to the clinical outcome.
Those are two statements. What grounds are there for censuring that doctor? Justice has gone badly astray, to the permanent damage of the doctor, who is highly skilled and respected, unless this is corrected—and it must be corrected, because it is entirely unjustifiable.
The report continues:
With the benefit of hindsight the consultant has recognised that he could have telephoned the Brook consultant neurosurgeon at home to try to ease the administrative situation".
It is very doubtful whether he could have telephoned, but how he could have eased the administrative situation when the Government are determined to close down the whole show, I do not know.
"This reflection was positively welcomed by the panel." That endorses the fact that there were no grounds for censuring Dr. Percy.
The panel did not censure Dr. Percy. The fact that the chairman of the region went on television and announced that the doctor had been censured was entirely unjustifiable. The fact that the previous


Secretary of State for Health also went on television and gave her view that the doctor had been justifiably censured was also completely unfounded.
I cannot over-emphasise the damage that it does to a person in a professional career to allow such things to be said. There is still confusion. I, among others, was assured by the hospital that the doctor had not been censured. I do not think that one can take the sentences that I have read from the report as censure. On the other hand, he has been told by the administrator that he has been censured. That, again, is entirely unsatisfactory. I ask the Minister and his advisers to get to the root of this and sort it out. We are relying on him to do so.
I want to say one word in general to the Minister, which perhaps he could pass on to the new Secretary of State, and it is this. The health service is doing a good job—there is no doubt about that—but it has one great drawback, which is that, publicly, it is always announced that more and more money is going to the health service. Yet the health service knows that, because of the rapid advance of medicine in so many different spheres, its need for finance is increasing faster than the amount that it receives. It is that which Ministers must take account of if there are to be proper arrangements for looking after the health of the British people.
Medicine has not stood still. It has probably advanced almost faster than any other scientific area, except nuclear and space. The fact that that is not acknowledged by Ministers is why people do not have confidence that Ministers know how to deal with the situation. That goes to the root of the question.
The same is also true of hospitals. Queen Mary's hospital has a tremendous reputation, and the result is that it can often deal with patients more quickly than neighbouring hospitals. We are then told that, if hospitals can deal with patients more quickly, they do not require so much money. The fact is that they require more money because they are dealing with more patients because they are dealing with them more quickly.
Could we please have a Secretary of State who recognises that, and perhaps mentions it occasionally, so that we know that he recognises it? That is essential to an understanding of the position of the health service.
The other aspect that I want to mention is that there are matters which are not satisfactory, such as the one that we have been discussing this morning. Will the Secretary of State please agree that these things are not satisfactory, and tell us how he will deal with such unsatisfactory aspects? Instead of merely emphasising again how much money is going into the health service and how much the Government want to maintain it, let us have a little quiet appreciation of the problems where they do exist, and an indication of how they will be dealt with for the benefit of the patients and of our constituents.
If the Secretary of State adopts that attitude, he will be far more successful in commending to the population—the voting population is getting closer and closer—the good things that the health service is doing, because our constituents will see that those things that are at the moment lacking are being satisfactorily looked at and dealt with.

Mr. Nicholas Brown: I count it a privilege to follow the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), and, like the right hon. Gentleman, I congratulate the hon. Member for Chislehurst (Mr. Sims) on having secured it. It is an important debate. It is important to Mr. Murray's family and friends, to the clinicians who cared for Mr. Murray, and to other health service workers who tried to do their best for him. It is also important because it raises wider questions about the provision of intensive care beds in the capital and the capital's catchment area.
When the incident occurred, the Under-Secretary of State for Health, who is to reply to the debate, wrote to the hon. Member for Orpington (Mr. Horam) about the case. In his letter, he did something which was, frankly, deplorable. He said:
The junior doctor in charge of his case at St. Mary's failed to persuade any of the other local neuroscience centres he contacted to admit him.
In other words, the letter sent by the Minister pins the blame firmly on the junior doctor.
Like the right hon. Member for Old Bexley and Sidcup, I deplore that scapegoating of health-care professionals. It is not justified. In any event, it is the job of the bed managers of hospitals to find beds. I cannot see how a senior doctor could find a bed that a junior doctor could not. A bed was either available or it was not.
That is the issue to which those who have responsibility for the health service should address themselves, rather than seeking to scapegoat health-care professionals. Like the right hon. Gentleman, I also deplore the appearance of the previous Secretary of State on television pontificating on who was guilty and who was not before the matter had been properly inquired into.
The Under-Secretary of State went on to say that he had already commissioned a study of intensive care provision. That will be an important study, and we look forward with interest to seeing the fruits of it. This is not the first time that the House has debated the provision and availability of intensive care beds in the NHS and, in particular, in the capital. There has been a spate of highly publicised incidents in which seriously ill or injured patients have been transported from one hospital to another in a desperate search for a bed in an intensive care unit. Mr. Murray's tragic case is one of the most dramatic, but it is not an isolated incident.
I well remember the Prime Minister being asked about this at Question Time. He defended the 200-mile journey by saying:
I understand that Mr. Murray required a highly specialised form of treatment with which Leeds was particularly able to help".— [Official Report, 9 March 1995; Vol. 256, c. 454.]
It is incumbent on the Minister when he responds to say what the highly specialised form of treatment was—a form of treatment which apparently was not available in the capital. It is also incumbent on him to say how it was that Leeds was "particularly"—the Prime Minister's word—able to help. I look forward to the Minister's explanation, and I hope that it is as plausible as he can manage.
As my hon. Friend the Member for Woolwich (Mr. Austin-Walker) pointed out, incidents such as this have sparked a series of inquiries into the availability of intensive care in the NHS. It is right in a debate such as


this that we should ask what is the size of the problem. The Department of Health has already conducted a study entitled "Study of Provision of Intensive Care in England", dated 1993. It provides us with some useful facts and findings to guide our debate.
The Department of Health tells us, for example, that, in the United States in 1992, the proportion of moneys spent on intensive care was 10 per cent. of total health costs. In the United States, total health costs consume some 12.4 per cent. of GDP. In the United Kingdom, for the same year, we spent on intensive care 1 per cent. of health-care costs, and in this country health-care costs consume only 6 per cent. of GDP. That represents a twentyfold difference.
The report goes on to state:
We found that considerable numbers of patients were denied the possibility of intensive care because the intensive care units were full.
It does not go on to say that perhaps, if a junior doctor had tried harder, or if a more senior doctor had asked for a bed, one would have been found. The Department's own study says that the intensive care units were full.
It goes on:
In our study we have shown that intensive care provision in England based on numbers of staffed beds is unequal between regional health authorities.
Our debates on provision in London have highlighted that.
The hon. Member for Chislehurst referred to an exchange about whether there had been increased or decreased provision for the capital in recent times. I wrote to him after the exchange telling him where I obtained my figures. I obtained them from the Minister in answer to a parliamentary question. They relate to the two London regional health authorities, and show that, between 1992 and 1993, the number of beds fell by 12 to 724. In other words, the two London regional health authorities covering London and its immediate catchment area have lost provision.
A survey was carried out in January this year by consultants at St. George's hospital, which showed that, out of 35 hospitals within the M25, only eight to 10 intensive care unit beds were available. Between 30 and 40 of those beds were closed because of funding or staff shortages. That is a slice of life revealed by a survey conducted by consultants at St. George's.
A second survey was conducted in February 1995 of five cities—London, Birmingham, Manchester, Cardiff and Glasgow—which found that, of a theoretical total of 452 intensive care beds, only 376 were open. The figures that the Government like to use do not reveal the whole story.
The Government responded to the survey by admitting the existence of pressing problems in the provision of intensive care beds, especially in London; and, as the Minister's letter reveals, they have ordered an urgent review. Given all that Ministers have said about the Labour party's call for a review and a moratorium on closures, it is a bit rich for them to say now that they will conduct an urgent review of intensive care provision.
Despite the Government's commitment, only two months passed before the previous Secretary of State signed the warrant for the closure of Guy's hospital, and approved the ripping out of brand new and as yet unused intensive care equipment from a ward in Philip Harris house. The hon. Member for Chislehurst knows what an

obscenity I consider that to be; we have debated these matters in the House before, and I do not suppose that his views differ much from mine.
It is fair to say that the provision of intensive care is very expensive. One bed costs about £1,500 for 24 hours, and health authorities and trusts think carefully before purchasing and providing more than is absolutely necessary. That apparent drive for efficiency, however, can have terrible, tragic results, especially in the event of an unexpected increase in demand.
The case that we are discussing suggests that one accident occasioned an unforeseen increase in demand in the capital on the day in question. What if four people had been injured in a traffic accident, rather than one? The tragedy would have been multiplied by four. If one bed was not available, four certainly were not.
It is clear to me—as it is to every observer, whether politically neutral or not—that there is a crisis in provision in the capital, and, indeed, in other urban areas. That crisis is money-driven, and driven by the Government's peculiar approach to the management of the national health service: savings are everything, and the provision of a front-line service must take second place.
The demand for intensive and emergency care cannot be entirely predictable, by its very nature. No one can predict when a serious traffic accident, for example, will occur—or, indeed, when a hospital operation will go wrong or something unexpected will be discovered. It is therefore essential to proper patient care to allow a reasonable margin of safety in the number of intensive care places that are funded and staffed.
As my hon. Friend the Member for Woolwich (Mr. Austin-Walker) pointed out, that margin of safety has not been in evidence in several instances. It is not good enough for Ministers to pass the responsibility on to local management, or, even more shamefully, to try to scapegoat individual clinicians.
As the right hon. Member for Wokingham (Mr. Redwood) has observed, it is the duty of Government to ensure that there are enough intensive care beds. If today's debate has highlighted that need as well as the tragic case of Mr. Murray, I hope that it will have done some good.

The Parliamentary Under-Secretary of State for Health (Mr. Tom Sackville): I congratulate my hon. Friend the Member for Chislehurst (Mr. Sims) on raising a matter that has caused considerable concern not only in his constituency but nationally as a result of the dramatic events on the night of 6–7 March. I welcome the presence of my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath), who has been involved through his discussions with the doctor concerned.
The Opposition Members who spoke have used the words "crisis" and "chaos" liberally, no doubt in an attempt to draw attention to what they were saying. There is no crisis, but an intelligent discussion is needed about the number of intensive care beds. For reasons that have already been given, a difficult balance must be struck between wasteful over-provision—the provision of resources that are then not used for much of the time—and the need to minimise the risk of incidents of the kind that we are discussing.
Both Opposition speakers refrained from specific discussion of the number of intensive care beds, and attempted to widen the argument to tie question of the


number of acute beds generally in the London area. The two issues may be conncected to some degree, but it is inappropriate to suggest that "a bed is a bed is a bed". As we all know, there is a world of difference between the question of how many acute beds there should be in London hospitals, and the specific issue of how many intensive care units there should be and how many staffed beds should be available in them.
Today's debate principally concerns the incidents that took place in March, and the lessons to be learned about the provision of neurosurgery and intensive care. Hon. Members discussed, in general terms, the sorry circumstances of the transfer from Sidcup to Leeds on the night of 6–7 March in a debate on 23 March. At that time, we were awaiting the report of an investigation of the case; I am now able to reveal the findings of that investigation, and the action that has been taken since. Before I do so, let me add my condolences to those that have already been extended to the Murray family in their bereavement.
Much has been made today of the treatment of Mr. Anthony Percy, the orthapaedic consultant at Queen Mary's hospital in Sidcup. I appreciate the reasons for which my right hon. Friend the Member for Old Bexley and Sidcup expressed concern, but the investigating panel felt that Mr. Percy—who was contacted at home at various times by the senior house officer in his attempts to find a bed for Mr. Murray—might have done more to help in what was a highly unusual and difficult situation for hospital staff.
It is a matter of record that the trust's chief executive wrote a private letter of censure to Mr. Percy, commenting on his contribution—although stressing that he had been responsible for no failure of clinical care, and that the question of disciplinary action did not arise.
My right hon. Friend the Member for Old Bexley and Sidcup suggested that that was inconsistent with another statement that the clinical outcome of the case would not have been affected, but it is not. No one has suggested that the clinical outcome was necessarily affected, however unsatisfactory it was that the patient had to be transported to Leeds. No one has suggested that that had a significant adverse effect on the patient—although I should be the last to say that what happened should have happened in that way: it is unacceptable that the patient had to be taken to Leeds.

Mr. Nicholas Brown: Will the Minister give way?

Mr. Sackville: No.
I well understand Mr. Percy's wish now to do all he can to put right the damage that he feels has been done to his reputation, and I very much regret the way in which the whole matter was reported.

Mr. Brown: Will the Minister give way?

Mr. Sackville: No. The hon. Gentleman had his chance to give his views; I have quite a long speech to make.
Given the possibility of legal proceedings, hon. Members will appreciate, as my right hon. Friend has said, that I cannot comment further on this matter. What I can categorically state is that there is no question of Mr. Percy being used as a scapegoat to deflect criticism of bed shortages in London.
Indeed, the investigation panel concluded that there was not a shortage of beds. Although the intensive care beds in neurosciences centres were certainly all very busy, the panel believed, on the evidence it had before it, that Mr. Murray could have been treated that night in London following his head injury. The key point is the management and use of beds and the co-ordination and communication between units, rather than the absolute number. That is the real issue, and I shall return to it.

Mr. Sims: My hon. Friend says that there is no question of there being any scapegoats in this matter, but has he read all the correspondence, in the course of which the chief executive says that he fears that scapegoats were required, the implication being that Mr. Percy is the scapegoat? Can my hon. Friend say whether Mr. Percy was censured or not? If so, why was he censured, and if there were no grounds for him being censured, why cannot that censure be withdrawn?

Mr. Sackville: I have stated the facts as I know them: a letter of censure was written to Mr. Percy by the hospital, critical of his performance. That is a matter of record.

Mr. Nicholas Brown: The Minister told the House that it was a private letter. If so, why did Ministers go on television and talk about it?

Mr. Sackville: We did so because it was very germane to the whole account of what happened on that night that the hospital was critical of Mr. Percy. There was enormous press interest in the matter. As I said, however, I regret the way in which some newspapers and media carried the story. I can understand why Mr. Percy feels that he has been unfairly treated.

Sir Edward Heath: That letter was sent some time after all this began, and I have quoted from the report of the hospital panel and its chairman of chancellors. Their conclusion was obviously different. The letter was sent by the administrator of the hospital. By what authority did he send that letter, when it was not justified by the whole panel of the hospital, with the chairman presiding?

Mr. Sackville: I understand that the letter was sent with the full knowledge of the chairman of the hospital, and that clearly the hospital was critical. The fact that that was perhaps blown up to a considerable extent by the media is regrettable, but it remains a matter of fact that, with the full knowledge and permission of the chairman, the hospital was critical of Mr. Percy.

Mr. Nicholas Brown: Will the Minister give way?

Mr. Sackville: No. I will carry on, because I have a lot to say about the action that has been taken since on intensive care beds.
On the situation during that night, the panel also concluded that the Royal Free hospital did have two intensive care beds available and could have taken the patient. I appreciate that that raises all sorts of queries, and I would like to make it clear that a call was made by Queen Mary's hospital, and the information was given to the doctor concerned that the Royal Free considered it clinically inappropriate to transport the patient across London. That was its opinion, and it was therefore asked to see whether some nearer facilities could be found.
As far as can be ascertained, there was no further contact after that. The Royal Free was not contacted again. That is why I say that there was a failure of communication and co-ordination, but it remains clear that two intensive care beds were available at the Royal Free. That much we know, and it is a matter of great regret that that was not followed up. I am not blaming anyone. The situation was confused and difficult. Later, a decision was therefore taken to transport the patient to Leeds.
The report makes it clear that, with the proper use of existing intensive care facilities and better co-ordination between hospitals, it should be possible to minimise the risk of inappropriate transfers of this sort occurring in the future.

Sir Edward Heath: Does it not seem to my hon. Friend to be quite extraordinary that, if those beds were available at the Royal Free, which it has since denied, and a doctor is on the other end of the telephone, the hospital should not say to him, "Yes, it would be much easier and more suitable for the patient if you could get him into the Brook, but if you can't get him into the Brook, then come back to us." It said nothing of the sort. It said to the doctors in Queen Mary's hospital, "Aren't the beds available? Try the Brook."

Mr. Sackville: That is not the information that I have, which is that the hospital said that beds were available, but advised that nearer facilities be sought. Unfortunately, that was not followed up. That is one of the factors that led to the inappropriate transfer of this patient to Leeds.
As the House already knows, the report calls—

Mr. Nicholas Brown: Will the Minister give way?

Mr. Sackville: No. I shall continue, and I have said what I understand to be the facts about what happened in relation to that telephone call.
The report calls for the establishment of stronger systems for the referral of patients to specialist neuroscience centres, better co-ordination of bed usage between neuroscience centres, and improved communication between specialist centres and their referring hospital. Those are important recommendations. All of them are being implemented, with some already in place and others being refined.
A key recommendation was that the London emergency bed service, about which my hon. Friend the Member for Chislehurst asked me earlier, should extend its service to cover intensive care beds. The new service began on 17 April, and is already proving to be of considerable assistance to units in helping to match supply and demand for intensive care services.
Trusts in the region were asked immediately to review their on-call protocols to make much clearer the involvement expected of staff out of hours.
All acute hospitals are required to make formal relationships with one of the specialist neuroscience centres. That is the centre that they will contact initially if they need to refer a patient for neurosurgery. Many hospitals in South Thames have already confirmed that they have such procedures in place.
For their part, the specialist neuroscience centres have introduced procedures to inform hospitals that normally refer patients to them of any severe pressure on beds and the alternative arrangements available. The burden of

finding a bed is thus co-ordinated by the specialist centres. If the specialist centre cannot identify a place, a referral is made to the emergency bed service, which maintains a comprehensive information service on bed availability for all London hospitals.
The procedures that have been established should ensure that, when a patient needs access to a specialist centre, the referral can be organised efficiently and with optimal clinical effectiveness. I have gone into the matter at some length, and I want to make it clear to the House that, with good organisation, the things that occurred on that night should be avoided in future. I hope that some of those actions that have been taken will minimise the risk of such events recurring.
Health authorities are actively considering intensive care provision, and are working with their local hospitals to ensure that the referral procedures are in place. The two Thames regions are also holding detailed discussions to ensure a fully co-ordinated approach to forward planning and bed usage between their specialist neuroscience centres.
Mr. Murray's injuries were severe, and he required both neurosurgery and intensive care. An intensive care unit is a specialised hospital ward where critically ill patients with organ failure can receive treatment and monitoring, using invasive techniques and high-technology equipment, and benefit from the high staffing ratio—at least one to one—necessary to maintain adequate care. The number of available intensive care beds in England has risen by over 100 since 1989 to more than 2,600, and the number of qualified intensive care nurses has risen by 1,000 to 7,650. The working group that has been set up will produce guidelines on admittance and the better use of those beds.
Despite those increases in facilities, there were allegations of shortages long before the Murray case. To clarify the matter, we commissioned a report from Professor Klim MacPherson of the health promotion sciences unit at the London School of Hygiene and Tropical Medicine on the provision of intensive care services in England.
That thorough report showed that, overall, there was sufficient provision. However, it identified a number of problems and important issues. In particular, it showed that about one in six admissions to intensive care are considered by clinicians to be inappropriate, on the grounds that the patients are either too ill to have any reasonable chance of recovery, or not ill enough to require the level of specialist care that is provided in an intensive care unit.
On 7 February, the report was formally sent to all health authorities and trusts asking them to examine local provision carefully in the light of the findings and recommendations. Following the publication of the report, Ministers met leaders of the relevant professional bodies and, in the light of those discussions, a working group of professionals, to which I have just referred, is considering guidelines for admission and discharge. It is also looking at the relationship between intensive care units and other less intensive forms of care, such as high dependency units.
Given the resources that are required for an intensive care bed, it is vital that we get the balance right between meeting the need for both emergency and planned treatment requiring intensive care, and avoiding those facilities being under-used. As we have heard in the


debate, that is a difficult balance. Getting it right remains a challenging priority for all those involved, given the fluctuations in demand for this highly specialised and intensive treatment.
The Government's policy, whether for London or for the rest of the country, is that it is for individual health authorities to plan the level of provision that is appropriate for their, areas, taking into account all factors of need, demand and the availability and desirability of other services.
Of particular interest to the debate is information on London. Professor MacPherson's report found that each of the Thames regions had more general intensive care beds per head of population than the national average. The former South East Thames region had the highest ratio in the country, with three beds per 100,000 of the population. The Department's information returns show that, in inner and outer London, the average number of available intensive care beds rose from 480 to 501 in the year to 1994.
The Government do not hold central information on the number of intensive care beds within different specialties. According to the London emergency beds service, there are currently 247 general adult intensive care beds in 35 hospitals within the 16 London health authorities. There are also 29 neuroscience intensive care beds, 50 paediatric intensive care beds and 186 beds in cardiothoracic units. In addition to these 512 beds are intensive care beds in renal, liver and other specialist units that are not presently covered by the emergency beds service.
To help to ensure the best use of available resources and to improve communication and co-ordination, the emergency beds service has extended its coverage to intensive care services, including neurosurgical intensive care in the Thames regions and surrounding area. It is operational 24 hours a day, and it contacts every intensive care unit in the Thames regions twice a day—or three times a day for those with specialist neurosurgery or paediatric beds—so as to update its information on bed availability. It is thus able to respond immediately to units that are seeking to transfer a patient because they have no spare capacity.
Initial experience of the emergency beds service is that it is proving very helpful. In the first 45 days of the service, there were 173 inquiries from 53 hospitals. On average, that is four a day, and there were as many as 13 on one day in April. The work of the service led to 112 patients being transferred to 54 destinations. Some 78 per cent. of the inquiries were for general intensive care and 14 per cent. were for neurosurgical intensive care.
The service is of considerable assistance to units in helping to match supply and demand for intensive care services. Similar services are being established in other parts of the country, with considerable benefit.
In the light of Professor MacPherson's finding that many intensive care beds are inappropriately used, no discussion of intensive care would be complete without considering acute bed provision. That the NHS generally will have fewer acute beds in 10 or 20 years' time is common ground. However, neither the Tomlinson report nor "Making London Better" includes a planned or target reduction in beds, and it is not Government policy to set such targets.
We have said that, in London, as in the rest of the country and in the world, more patients will be treated with fewer beds. Developments in modern health care,

such as non-invasive diagnosis and treatment, and new and improved drug therapies, mean that, overall, the demand for beds is steadily falling. That trend is clear in Britain and overseas.

Mr. Nicholas Brown: Will the Minister give way?

Mr. Sackville: No. I should like to continue.
The common theme from many studies is the need for better management. That was the key message of a report on beds from the chief executives of the inner London health authorities. Considerable work is being done to develop neurosciences in the Thames regions and London. That is well in hand, and the transfer of neurosurgery from the Brook hospital is being phased to ensure the continuation of safe and effective services. My hon. Friend the Member for Chislehurst spoke about that transfer.
The new neurosurgery service, which was established at a cost of £7 million including magnetic resonance imaging facilities at the Ruskin wing of King's, will begin to take patients next month. It will be complemented in 1999 by the move of the neurology service from the Maudsley to King's, so that a comprehensive service will be available in one building. The Higher Education Funding Council is also investing in specialist research and teaching facilities. That will bring an academic dimension, and further complement the service at King's.
A clinically led review of neuroscience services in South Thames recently proposed that a new specialist neurosurgery unit should be located at St. George's hospital, Tooting. If health authorities agree to those proposals, the new centre will replace the outdated facilities at Atkinson Morley hospital and Hurstwood Park. Actions already taken and current considerations demonstrate the commitment to ensuring that London and South Thames in particular have the best possible pattern of neuroscience services.
The events of 6 and 7 March underline the urgency and the importance of the work that is already in hand to define and facilitate the best possible future pattern of neuroscience and intensive care facilities in the Thames regions. I hope that I have been able to demonstrate the Department's commitment to ensuring that everything possible is done to avoid any repetition of the unacceptable events of that night. I understand the concerns of my hon. Friend the Member for Chislehurst about what happened.
I am grateful to my right hon. Friend the Member for Old Bexley and Sidcup (Sir E. Heath) for his comments about the good work of the NHS. I agree that the many new technologies, new medicines and new ways of treating patients mean that there will be a demand for ever greater resources for the NHS. I hope that my right hon. Friend was not entirely correct when he said that Ministers have failed to acknowledge that.
I take it as read, just looking at the history of resources in the NHS, that the same pattern will continue; that we will need to find more and more resources to provide for ever greater demand for health as new ways of treating patients emerge. I think that many problems will exist. The problem of balancing the need for intensive care beds with supply will always exist. I hope that, as my right hon. Friend the Member for Old Bexley and Sidcup suggested, we will take a quiet and sensible approach to the matter, and that some of what I have said will convince him that we are doing just that.

Sir Edward Heath: Does my hon. Friend accept that, while we welcome the improvements that he has outlined and hope that they will be more effective than the present arrangements, I for one cannot accept the information that he has been given on Mr. Percy? As the matter is likely to come before the courts, he has heard far from the last of it.

Radioactive Waste

Mr. Clive Betts: I want to raise today issues surrounding the disposal of radioactive waste from the nuclear industry and that which is generated by medical processes in local hospitals. I want to concentrate on low-level waste, which has been the subject of particular concern in my constituency during the past few months. I hope that the Government will reiterate some good news on that subject.
The Government published a consultation document on 14 August last year in which they reviewed nuclear waste and its disposal. Last week, a White Paper was issued in response to that consultation process. I want to place on record straight away that I welcome the Government's decision to abandon their initial intention, as expressed in the consultation document, to allow waste from the nuclear industry to be deposited on public refuse sites. This morning, I want to ask questions about how we have come to have this debate today and why it was necessary to consult on the issue in the first place.
I also intend to discuss some issues raised by the White Paper appertaining to low-level waste and its disposal—I want to seek some clarification from the Minister on that point. Last, I want to raise some issues surrounding the transportation of waste from the nuclear industry. My hon. Friend the Member for Nottingham, South (Mr. Simpson) hopes to raise his own concerns on transportation.
It goes without saying that the issue of radioactive waste is highly sensitive. It naturally worries the public. Even when the waste in question comes from local hospitals, and people can therefore see an obvious benefit from the processes that have produced it, local residents are worried about its disposal and treatment. Those public concerns are naturally heightened when the waste is from the nuclear industry. It does not take speeches from politicians at public meetings to produce that concern; it is natural. The issue has therefore to be handled with sensitivity and I shall today question whether the Government have not been guilty during the past few months of substantial insensitivity.
In my constituency, we have a large public refuse tip called Beighton tip. Only four or five years ago, planning permission was granted to extend it. Tipping will continue on the site for the next two to three years. It is surrounded by houses. A local school and a nature conservation area of reclaimed land are next door to it. Excellent work has been put in by volunteers from the local community who are committed to our natural environment.
The tip has naturally caused public disquiet. No one likes living next door to a refuse tip, but when proposals are made to dispose of radioactive waste from the nuclear industry at such a site, it is natural that residents become extremely alarmed. For many years, radioactive waste from local hospitals has been deposited on the site. Even that causes some concern. A local group of residents has formed the Hackenthorpe against the tip campaign and been vigilant in monitoring all matters in connection with the tip. They attend regular meetings with me, local councillors and council officers, at which they raise concerns about the depositing there of any radioactive waste whatever.
In Sheffield, we have considered the possibility of incinerating radioactive waste, but we were worried about emissions into the atmosphere. On balance, it was thought


that depositing the waste in a controlled and authorised way at Beighton tip was probably the best way forward. However, there is a difference between dealing with radioactive waste from hospitals and dealing similarly with waste from the nuclear industry.
The first difference is that there are no problems of definition with waste from hospitals. It is all low-level waste. It is not a matter of where one draws the line. It is all the lowest level radioactive waste that is in need of disposal. That is not the case with waste from the nuclear industry which, as the Government's consultation document illustrates, comes in various grades from low level right the way through to high level, for which specific plans are made. There is also a difference in type, which I shall deal with later.
There is a scientific difference between waste from hospitals and waste from the nuclear industry. The Government's consultation document published in August last year therefore made chilling reading. I shall quote from the key points in the document. It says:
Some of the waste from nuclear sites which is currently disposed of to Drigg could in principle be safely disposed of to local landfills, while still providing full radiological protection of the public, although each case would need to be carefully considered. Yet even though the charges for disposal at Drigg are high compared with landfill burial, the majority of the nuclear industry has not switched to alternative disposal routes, nor does the ability to charge for radioactive waste disposals seem to have generated interest from private landfill operators.
It is probably not surprising that people are not queueing up to take the material, but the document expresses some surprise that, despite the willingness of the nuclear industry to pay, even private operators have not been willing to take the material on board and put it on private sites.
The document continues:
This current practice creates needless pressure on the disposal capacity at Drigg. The Government therefore believes that there would be advantage in encouraging waste producers to make greater use of controlled burial. Views are invited on this, as well as on the methods by which it might be achieved.
That was the key part of the proposal in the consultation document last August. It was some time before there was public recognition that the proposal was around at all. Indeed, the public profile of the issue was raised only when Greenpeace issued a press release and there followed an article in the Observer.
It is worth asking questions at this stage about why the idea was put out to consultation. I accept that it was a suggestion for consultation, but still it was raised. Once the public read about a Government proposal, even though the Government keep on saying that it is merely a matter for consultation, they become worried that what is proposed will happen—that waste from the nuclear industry will appear on their doorsteps. They know that, for all the security measures that are taken on refuse tips, children go and play on them and that, although they should not, people have motorbike scrambles on them. People can put up all the warning signs and fences in the world, but they will not completely prevent public access to such sites. People therefore become extremely concerned.
It is even more worrying that the proposal seems to have been brought forward for two reasons. The words that I have just read out gave the game away. First, the

Government were concerned about the cost of using Drigg and were considering burial at public refuse sites as a cheaper option—it was about saving money. Secondly, they were looking to save money by considering Drigg for the disposal of intermediate-level waste, which would be cheaper than the way in which it is currently disposed of.
There is also the complication of reprocessing waste from nuclear industries in other countries. The Government decided not to return the totality of that waste to other countries but have chosen, for cheapness of transportation, to send back high-level waste in concentrated form and leave substantial volumes of low-level waste for disposal in this country. That presents the Government with the problem of how to dispose of the low-level waste. Given the capacity problems at Drigg, and the pressure it will be under if it is also to be used for intermediate waste, there will be a difficulty not merely on cost but on where else the waste can be disposed of.
It is worrying that the Government brought forward the proposals because of their policy decisions on reprocessing waste from other countries and because of considerations to do with cheapness. Burial on refuse sites was thought to be an easy, cheap and convenient way out of their difficulties.
It was also unfortunate that the Government chose to raise such a sensitive matter without bringing it more forcibly to public attention. Until the Observer story, the proposal had gone largely unnoticed. It was hidden away in a few paragraphs towards the end of a very large document which mainly dealt with other grades of waste from the nuclear industry. The Government made no attempt to highlight their proposals. That shows that, while it was a consultation document in name, little effort was made to activate the consultation process and bring it to the attention of people who might want to have a say—not least ordinary members of the public such as my constituents who live around the Beighton tip.
The Government also said that there was not a list of tips into which they were proposing to put waste from the nuclear industry. In one sense, that was technically correct, because paragraph 126 of the report mentioned that authorisations were necessary. It states:
Disposals are permitted only when the waste containment characteristics and performance of the site have been fully assessed".
I accept that, even if the Government had carried on with this proposal and had come to a different conclusion the day after the White Paper was announced, waste from the nuclear industry would not have been deposited on tips without careful consideration of their containment characteristics. However, the fact is that the document listed municipal refuse sites that would be considered for the disposal of nuclear waste—nuclear waste would not be disposed of at those sites but they would be considered for it.
The existence of a list heightens public concern. People know that, even if the tip they live near has not been designated as a disposal site, it is on the list for consideration to be so designated. The public naturally react. They believe that Government lists have some validity and that proposals that the Government make are likely to come to fruition.
It is not as though the Government could not have foreseen what would happen. Indeed, I find it staggering that the Government felt that they did not have to offer


any extra explanation or to contact local authorities and ask for views on the proposals. They must have realised what the reaction would be because there was a parallel case in the mid 1980s. I am sure that the Minister is aware of that. He will want to say what lessons were learnt from the row in the 1980s when the Government climbed down on similar proposals in a consultation document.
In the mid-1980s, the Government brought forward proposals to create disposal sites for low-level radioactive waste from the nuclear industry at Fulbeck, South Killinghome, Elstow and Bradwell. That led to a major campaign by bodies such as Greenpeace and the county councils involved—Humberside, Bedfordshire and Essex. It was a cross-party campaign. I do not think that anyone in the councils supported the proposals, whatever party they came from.
The issues raised in that campaign were the same as those that have been raised in the past few months: the definition of low-level nuclear waste, the fact that the definition might be changed at some stage because it is a quantitative definition and quantities can be changed and the concern that, once a site had been established for low-level waste, a policy change could mean that intermediate waste could be deposited there too, especially as the Government were thinking of doing that at Drigg. There did not seem to be an overall policy for coping with the capacity difficulties of the nuclear industry. Those issues were raised then and they are pertinent to this debate.
In 1987, the Government withdrew the proposals. I am sure that the withdrawal of those proposals in, I think, May of that year had nothing to do with the general election that was about to take place; or with the fact that three of the four Members of Parliament for the constituencies involved happened to include the Government Chief Whip and Under-Secretaries of State at the Home Office and the Department of Health. All of them spoke out against the proposals.
The press reports at the time, and the undue haste with which the then Secretary of State, Nicholas Ridley, rushed the announcement through the Commons on a Friday morning, interrupting private Members' business, suggest that the Government had an eye on the electorate's views. Ultimately, they gave in to public pressure. The Times said:
Public action led to nuclear waste ruling, says Nirex".
Nirex, which was involved in evaluating the sites, had no doubt at all. Mr. John Baker, the chairman of Nirex said that it was public opposition to the schemes which stopped them.
The Government should therefore not have been surprised, when they brought forward proposals in 1994, that there was a public reaction. There had been a reaction in the 1980s. The public affected by all four sites that had been designated to receive low-level waste reacted. County councils, Greenpeace and local Members of Parliament reacted. In the end, the Government reacted too, and climbed down. That incident is clearly a parallel.
It would be interesting to know to what extent the Government took account of what happened in the 1980s before they put their proposals in the consultation document. It seems inconceivable, given what happened in the 1980s, that the Government could have been unaware of public opposition and failed to take account of it. Why, then, did they put forward a proposal this year

only to withdraw it a few months later, again on the grounds of public opposition? That is the reason that the Government have given for withdrawing the proposals in their consultation document.
When challenged about the consultation document, the Government argued that it was not too sinister because they were not proposing—with one minor exception, as was explained to me in a written answer—to change the law. The law as it currently stands allows for the disposal of radioactive waste both from medical processes and from the nuclear industry, providing, of course, that proper authorisation from Her Majesty's inspectors is given for disposal on a site. Obviously, the site has to be properly inspected and recognised as having the necessary containment characteristics.
The Government said that what was proposed was not a big deal as they were not changing the legislation—but they were changing policy. Although low-level waste from the nuclear industry could legally be deposited on public landfill sites, it had not happened, as the consultation document recognises, so the Government were in effect proposing a change of policy.
In many ways, that change of policy was more worrying and frightening than the change of policy proposed in the mid-1980s when the campaign was run on the four sites that I mentioned. Those four sites were to be specifically designated for low-level waste from the nuclear industry. The change of policy proposed in the consultation document in 1994 was not to create four new specifically designed sites but to deposit the waste on public refuse tips.
If because of public opposition the Government withdrew a proposal to create four specifically designated sites in the 1980s, did they not think that the public might be even more worried about proposals to put such waste on refuse tips on which their children could play? It is incomprehensible that the Government could come up with such a proposal without realising the likelihood of public outrage.
As a Member of Parliament, I received letters and telephone calls immediately. People asked whether the proposal was real. When I said yes, they said that the Government must be off their head. No one could regard the proposal as serious. A large public meeting in the constituency was attended by 200 people. We did not merely berate the proposal but invited people from Her Majesty's inspectorate of pollution and the hospitals, environmental health officers and people from the South Yorkshire waste regulation unit. We ensured that local people had all the technical information that they needed to form an opinion. Needless to say, at the end of the meeting, no one thought that the proposal was a good idea.
The local residents who were part of the Hackenthorpe against the tip campaign were outraged and made their views clear, as did Greenpeace. Essentially, however, it was ordinary local people who said that they did not want their children brought up next to a tip where nuclear waste was deposited.
The Government can give all the assurances in the world that nuclear waste can be deposited only on tips that have a proper clay base which is not permeable so that there should be no leakage into the local water courses. However, at Beighton tip, which happens to have a clay base and where thorough inspections were carried out and advice given by the National Rivers Authority


and the waste regulation unit before it was used for its current purposes, there have been unforeseen leakages of leachate into the Shirebrook. The city council has been fined £5,000 for allowing those leakages to occur. Even with proper planning, such problems occur. Local residents were aware of the risks and asked how they could be absolutely certain that leaks would not occur if nuclear waste was put on their local tip.
Residents asked whether, as the tip was a council tip, the council could refuse to accept such waste. The answer came back that the council could not refuse. Although the council has to be consulted, an authorisation from HMIP means that the council cannot refuse to take radioactive waste even though it owns the tip. That is currently the case with waste from local hospitals and would be the case with nuclear waste if the change of policy had come about. In a written answer, the former Minister for the Environment and Countryside said:
Under section 18 of the Radioactive Substances Act 1983, local authorities have a duty to accept radioactive waste for controlled burial if the regulatory bodies authorise disposal to sites provided by them. The consultation document contained no proposals to alter or extend that duty."—[Official Report, 6 December 1994; Vol. 251, c. 132. ]
Officers of Sheffield city council attended the meeting and gave professional advice and made it clear that they were opposed to the proposal. However, as the law stands—and with no proposal to alter it—the council might well have been compelled to take waste had the Government's proposals gone ahead.
There are, of course, some private tips in the South Yorkshire area which could have agreed to take the waste. In that case, the council would have no statutory right even to be consulted on behalf of the local populace. With the establishment of the Environment Agency, the waste regulation unit's remit in these matters will be removed, so local opinion will not be reflected through the democratic process.
At the meeting, someone said that waste from the hospital was already deposited on the tip and asked what difference additional waste would make, as it would all be the same low-level waste. I am not a scientist, but I understand that such matters are now included in general certificate of secondary education courses. There are apparently differences in terms of the isotopes involved in the medical processes that create radioactive waste.
David Purchon, the director of environmental health for whom I have the highest professional regard, explained at the meeting that waste including alpha-emitters has a low penetrative quality and that one can walk on it without being exposed to radioactivity. In fact, one has to swallow it for it to have any effect, which is wholly understandable in view of the medical processes that create it.
The difference is that waste from the nuclear industry includes gamma and beta-emitters. Waste may be classified as low-level waste, belong to the same category as hospital waste and have the same energy, but when alpha and beta-emitters are involved, the waste has a different penetrative quality. Putting it on a public refuse site poses a greater risk to the public as there is a possibility of radioactive penetration such as would not be possible with the same grade of waste from medical processes. All that was explained at the meeting. It might have slightly reassured people about the medical waste

being deposited on the site, but it provided no reassurance at all about the possibility of industrial nuclear waste arriving on their doorstep. Indeed, people felt even more compelled to mount a campaign.
We had a very good campaign. Local television reporters and journalists attended the meeting and we had a great deal of local coverage. There was a silent vigil on site which was attended by many local residents, and a petition of 10,000 signatures was collected. Those involved were ordinary people who probably did not understand all the scientific issues but who were very worried about what they regarded as a threat to their environment. We were also supported by Sheffield city council and we welcomed the resolution that it passed. We received support from Greenpeace, and I congratulate that organisation on raising the issue in the first place and on its campaigning.
The campaign also received tremendous support from the local tenants' federation in Sheffield, which collected many of the signatures for the petition. People from the federation talked to ordinary people and enabled them to express their concern through the petition. I pay tribute in particular to Olive Caterer from the federation for her energy and enthusiasm. The Hackenthorpe against the tip campaign might have been voluble in its criticism, but it worked hard. Its chair, Irene Dawtry, spoke at meetings and to the media and kept local residents informed of what was happening. I congratulate all the individuals and organisations involved. The fact that they managed to collect 10,000 signatures is a tribute to their energy and enthusiasm, and evidence of their burning desire to stop a wrong being committed against their community.
I conclude by asking the Minister some questions. My constituents are delighted with the outcome of the consultation process, in that their campaign was successful and represents a victory for the ordinary people of Sheffield. It is good that the Government listened to them, but why on earth was the proposal included in the consultation process in the first place?
Why on earth did the Government make such a suggestion, having experienced the public opposition to the proposal in the 1980s? It is good that public opinion has been listened to and that the campaign mounted by my constituents has succeeded, but why was it necessary to upset and concern them?
Will the Government give a commitment that this is the last time that they will bring forward any such proposal? Will they confirm that they are not just saying that, for the time being, they do not have any ideas about dumping waste from the nuclear industry on public refuse sites?
My hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) kindly met a delegation of my constituents who came down with a large part of the petition. In his own direct way, he spoke for all of them when he simply said that the proposals were daft and should never have been put forward. He made it very clear that when the Labour party forms the next Government, it will not ever contemplate such proposals. I hope that the Minister will give a similar commitment on behalf of his party.
Will the Minister indicate why the Government, in recognising that such dumping is a stupid idea, are not prepared to change the law? At present, it is legally possible for waste from the nuclear industry to be put on public refuse tips. The Government are saying that it is not their policy at this stage to do so, so why do they not relieve public concern and change the law accordingly?
I have a few more questions about waste from local hospitals. I have explained that I understand the differences between hospital and nuclear waste. The public recognise that waste from hospitals is not merely different in type, but that it is all low level, and that they feel some sense of obligation and responsibility for it in their community. One concern is about the Government's indication that, in future, only local authority tips will be compelled to take waste from such processes. There will not be any compulsion to do so on private tips or on tips owned by local authority waste disposal companies.
Given that most local authority tips are being transferred to LAWDAC ownership, how many tips will remain under the ownership of local authorities in respect of which compulsion can be used? Will local authority tips left under local authority control have to take more such waste because other tips will not take it? If there is not a clear answer to that question, my constituents will become concerned.
Will the Minister also explain why, as the White Paper indicates, local authorities will be consulted on all proposals about the authorised disposal of radioactive waste, but will not have a statutory right to be consulted on proposals to put waste on private tips? Why does not the Minister give them such a statutory right? If the Government accept that it is right that they should be consulted, why should not they make such provision statutory?
I do not know whether it is a technical slip in the White Paper, but while the Government accept that there should be consultation about the disposal of radioactive waste from hospitals on private tips, they do not indicate that there should be consultation on such waste being disposed on tips owned by LAWDACs. I do not know whether that is a mere omission and that, in fact, the Government intend to consult local authorities in such cases. I recognise that local authorities are entitled to—I think—20 per cent. of directorial representation on LAWDACs, but as local authority members or officers are to sit on a LAWDAC as directors, and are not there simply to report back to their authorities, and in view of their responsibilities as company directors, I should have thought that direct consultation with local authorities would be in order.
Finally, I shall raise the issue of transportation of nuclear waste, about which my hon. Friend the Member for Nottingham, South will shortly provide more detail. I spoke to the chief fire officer in South Yorkshire about the matter. There has been much correspondence from South Yorkshire on the transportation of nuclear weapons—there has also been a lot about nuclear waste.
The Government feel no obligation or need to advise fire authorities in advance that waste will be moving through their areas. The police are told, but the fire authorities are not, even though fire authority staff would have to turn up to deal with any accident or emergency. Certainly in the case of nuclear waste, a description of the material being carried appears on the outside of the vehicle transporting it, yet no advance warning is given to enable fire services to prepare.
I also understand that there is no capacity for joint training between the nuclear industry and local fire services so as to form a mutual understanding of the materials involved and the sort of joint processes that might have to be conducted if an emergency or accident occurred. That is very worrying. I do not understand why

the Government are intent on keeping the matter secret. Why cannot they be more open about it? Why cannot they trust the fire services, which have an important—indeed, essential—and often dangerous job to do on behalf of the public? Why cannot the Government give advance warning, facilitate joint training and enable greater public safety in such matters?
In conclusion, I want to emphasise that, for my constituents, this is a day for celebration. It is a day for congratulating the Government on withdrawing proposals that should not have been made in the first place and for congratulating the people of Sheffield, especially in the Attercliffe constituency, on a great public campaign to stop waste from the nuclear industry being dumped on Beighton tip. Many people who have joined in the campaign with enthusiasm deserve great credit.
I hope that it is also a day for clarification of the issues concerning medical waste and a day for obtaining further assurances on the legalities of disposing of waste from the nuclear industry. I also hope that it is a day on which a clear commitment will be made—that we will never again debate this matter in the House because we will never again worry people, especially my constituents, that nuclear waste will appear on their doorstep, or on their local refuse tip, because never again will any Government propose a policy that gives rise to such public concern.

Mr. Alan Simpson: I am very pleased that my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) has obtained this debate. I share many of his concerns about the disposal of nuclear waste—concerns which are likely only to increase as we have to face the decommissioning of nuclear power stations as an issue of today rather than a distant prospect for tomorrow. I shall concentrate on the transportation of nuclear materials, which has an equally practical focus.
In the early hours of 26 June, a lorry going through part of my constituency was involved in an accident at a roundabout. As a result, a concrete bunker containing nuclear materials was thrown off the lorry and split open. The canisters inside, containing caesium and beryllium, were deposited on to the road. The good news is that the lead casing of those canisters was not fractured and the risk to the public turned out to be minimal. If the canisters had been fractured, we would have been talking about a very different matter. I understand that those substances would in a very short time have a catastrophic effect on the nervous system of anyone exposed to them.
The roads concerned were closed for about four hours while the wreckage was cleared and tests were conducted for the prospect of any leakage. It turned out that that lorry movement was just one of 600,000 vehicle movements around the United Kingdom every year. The lorry was not delivering nuclear waste but nuclear materials for use on an oil rig and was travelling from Morecambe to Great Yarmouth. What worried me was that as we tried to explore the public safety implications of such traffic movements the matter became more of a farce than an accident.
The shift from accident to absurdity was exposed by journalists on the Nottingham Evening Post, to whom I am particularly grateful, when they tried to find out who knew what about the contents of the containers being transported and the risk levels to which—potentially—members of the


public were exposed. The farcical element started when the journalists contacted the Department of Transport. The response of the officials there was that such matters had nothing to do with them but were the responsibility of the Health and Safety Executive. But the HSE said no, such matters were the responsibility of the police and the Department of Transport. We then turned to the Central Office of Information and were told that there was a joint responsibility between the Health and Safety Executive and the Department of Transport. When we went back to the HSE, however, the people there said the matter was not their responsibility. They did not accept responsibility for the regulations and told us to go back to the Department of Transport to clarify what the regulations were. Eventually, when we got in touch with the HSE yet again, it agreed that the regulations were its responsibility after all and said that it would look into the matter.
I was extremely alarmed when HSE staff said that under the existing regulations there was no obligation to notify the HSE, the Department of Transport, the emergency services or the local authority about the movement of nuclear materials. My alarm was compounded when I contacted the people who, over many years, I had come to expect to be responsible at a local level for the discharge of duties in relation to public safety and the transport of goods in the local environment.
I contacted the chair of the public protection committee and the emergency planning officer for Nottinghamshire. The emergency planning officer confirmed to me in writing:
The Police are only notified of military consignments, none of the emergency services are notified of civilian movements … safe routes and the volume of traffic is not known.
The chair of the public protection committee replied to the county council which, understandably, was as concerned as local residents, in the following words:
Neither I, nor the Emergency Services are made aware of the movement of radioactive materials through our county. Since the use of radioactive isotopes is relatively commonplace in our hospitals, universities and industry, it is to be assumed that they are transported from time to time. These materials that are less hazardous concern me less than the intermediate and high level radioactive substances that can be and I am sure are transported through our county. The storage and use of such materials is controlled by HM Inspectorate of Pollution under the Radioactive Substances Act 1960 and the Fire and Rescue Service is notified of the nature and location of such sources. However … they have no knowledge of where or when radioactive material is being transported.
The Government consultative document on the transport by road of radioactive materials must be welcomed, but it still focuses on only three main areas—packaging, labelling and driver training. That misses out a whole series of areas which, understandably, public authorities would like clarified. Many terms in the consultative document are obscure and unhelpful, and both my local authority and the Association of County Councils have shared those concerns in previous representations that they have made.
The document uses terms such as "a suitable container" without defining what would be suitable to contain radioactive materials. The document also mentions a duty for the carrier to "take reasonable care", but nowhere is there a code of conduct defining reasonable care. There is a clear recognition of the importance of testing containers for suitability and strength at the beginning of their lives,

but no requirement to test for wear and tear during the lifetime of their use. We contacted the HSE to ask what the word "suitable" meant, and the spokesman replied that he did not know but would do his best to find out. As yet we have received no explanation.
The document mentions driver training but says nothing about carrier licensing. It worries me to realise that there is no licensing requirement for any vehicle weighing less than 3.5 tonnes. The requirement is simply a notion of some sort of training, which is not monitored. The danger is that if that is not more tightly regulated it could turn out to be a cowboys' charter and the lads who offer to tarmac our path one day could be trundling radioactive materials past our house the next day, having invested £200 or £300 to make the signs for their vehicle but without meeting any of the standards that we should demand in a system for the movement of radioactive materials with licensing at its core.
The consultation document still does not mention an obligation to notify anyone about the frequency or direction of road transport movements. I fail to understand why that should be so. It does not seem to me a party political point at all. I can see no interest on either side of the House that would be served by the lack of a requirement to notify public authorities and especially the emergency services of the movement of radioactive materials on public roads.
In the context not only of today's 600,000 road traffic movements but of the near certainty that that number will increase, a publicly notified and regulated set of procedures to govern the terms and frequency of such movements is essential. We need a statutory framework, and it should consist of four elements.
First, there must be prior notification of the police, the fire services and other emergency services which would be involved in clearing up an accident involving the transport of nuclear materials. They need to know in advance what plans there are for such movements. Secondly, there should be a requirement for prior consultations with the public bodies through whose areas the loads would be transported. That is a simple matter of common sense.
If Nottinghamshire county council had been asked for its suggestions about the safest and most acceptable routes along which to move radioactive materials through the county, it would have provided that information—and I doubt whether it would have directed such loads through the built-up urban areas that the lorry was passing on the night of 26 June. It would have suggested a route avoiding densely populated areas rather than passing through them simply because that might be a few minutes quicker.
The county council would also have been able to offer, through the police, a form of guided transport through the county, or through the city of Nottingham. That could be done if there were an obligation to notify in advance. At present, it cannot be done because no such obligation exists. I cannot see any suggested framework being workable or acceptable to the public if it is not attached to a strict licensing system for the carriers of nuclear materials. It is not enough to know where the load will end up, although I accept that there are huge issues about where the load will end up and how it is to be disposed. There should be public concern, and concern among Members of Parliament, about the quality, reputation and experience of carriers involved in the transport of radioactive materials.
Finally, a point must be changed in relation to the wording of the consultative document about public risk. As it stands, the document refers only to environmental damage. There are experienced people in this House, around the country and internationally who understand that measuring public damage from exposure to radioactive materials in many cases comes many years after the damage has been done, so it is singularly unhelpful to have that as a benchmark of the Government's consultative document. It would be far better to build in a requirement which defines the prohibition of unauthorised releases of radioactive materials into the environment. That recommendation has been made by public authorities around the country to the Minister, and I hope that he will take it on board.
Accidents such as the one which occurred at Nottingham should not happen, but in a country where we will face an increasing volume of road traffic movements involving radioactive materials we must accept that there is a risk that we cannot entirely eliminate. We must establish an ethical basis for allowing such movements to take place, and we must build two things into the system. First, the public and local authorities have a right to know about movements taking place through the environment which are potentially affecting their lives. Secondly, we need a legal framework which offers the highest standards of public protection at a reasonable cost. We are not talking about something that is likely to cost a great deal, but about a framework that could change the process from a clandestine, inadequate and ill-informed one into one that is open and above board.
The House must ensure that a fully informed response mechanism exists to deal with accidents involving the transportation of nuclear waste. That, rather than a farce, is what the public have a right to expect of this House. We do not have the right to expose the public to unnecessary risks because we will not provide a regulatory framework. Nor have we the right to expose members of the emergency services to unnecessary risks by not telling them in advance the nature and contents of loads, the frequency of traffic movements and the times and directions of the loads being transported. A small regulatory requirement could produce a huge benefit to the public, and that is the duty that the House must meet.

Mr. Michael Stephen: Whether we like it or not, we live in the nuclear age. The genie cannot be put back in the bottle and the discoveries of nuclear scientists cannot be undiscovered. Nor should they, as the peaceful uses of nuclear energy have bestowed enormous benefits upon mankind, especially in the generation of electrical energy, upon which all modern societies depend for the health, welfare and well-being of their citizens.
We must do everything we can to save energy and use it most efficiently, but there will always be a need for large-scale generation. The generation of electricity by nuclear means is enormously safe and does not create carbon dioxide or emissions of nitrous oxide which, as we all know, are damaging to the environment. The safety record of the nuclear industry in this country is second to none.
When nuclear materials are used, waste is created, and proper facilities must be provided for the disposal of that waste. Much of the low-level nuclear waste that has been referred to by the hon. Members for Sheffield, Attercliffe

(Mr. Betts) and for Nottingham, South (Mr. Simpson) is generated by hospitals. While there is always a danger in handling nuclear materials, the benefits in terms of the lives saved and prolonged and the improvements in the quality of life from the use of nuclear materials in our hospitals outweigh the dangers that those materials pose to society.
This is an emotive issue. Whenever one uses the word "nuclear", the emotional level is raised. That is possibly because of the connotations of nuclear weapons and explosions and the terrible suffering caused in Hiroshima and Nagasaki, not only by the explosions but by the subsequent radiation. Organisations such as Greenpeace use that emotion to the best possible advantage in pursuit of their case.
Greenpeace has established such a position in the world that, to some people, everything that Greenpeace says is right while everything that the Government say is wrong. I do not think that that is the case. Greenpeace has a role to play in bringing our attention to environmental dangers, but it was wrong about the incidence of cancer in the Sellafield area and about the emission of dioxins from high-temperature incineration, and it grossly exaggerated the environmental effects of the Braer disaster. Greenpeace is not always right.
I am concerned that organisations such as Greenpeace are flourishing in the area of what is called direct action, where a group of people decide that something shall or shall not be done, bypass the democratic process and seek to impose their will on their fellow citizens. That is not the way to proceed in a democratic society. The place in this country where decisions must be made affecting all of our citizens is here in this House. We do not live in the age of the suffragettes or the Tolpuddle martyrs, when thousands of our fellow citizens were not represented. Decisions affecting our fellow citizens must be made in this House after a full debate in which the House can hear all points of view from Members representing all sections of the community.
I have no particular knowledge of the tip to which the hon. Member for Attercliffe referred, but I was a member of Essex county council at the time of Bradwell, so I have some experience of the issues involved. Low-level waste can be a particularly emotional issue, particularly when it is planned to dispose of it not far from an area of human habitation. But we must not get carried away by emotion or by the "not in my backyard" factor. We are all politicians, and so are local councillors. It is all too easy to jump on to an emotional bandwagon to get oneself elected or re-elected or to promote the interests of one's political party. We must resist those temptations.
We are here as the representatives of the people of this country as a whole, and we must make decisions in the interests of those people and not in the interests of people who happen to live in a particular place at a particular time in history. We have a heavy responsibility not to allow people to believe, as many do today, that it is possible to live in a risk-free society. It is not. We never have lived in a risk-free society, and we never will. Those who believe that death is optional should think again and realise that we live in a real world.
It is easy for us to regulate. Opposition Members have suggested ways in which we might fill 10 or a dozen more pages of the statute book. But we must resist the temptation to regulate and impose unjustifiable burdens on the community and businesses that serve the


community. Opposition Members have not pointed to a single incident in which a member of the public's health or safety has been damaged. Given the many hundreds of thousands of movements of nuclear materials around the country, those responsible for that transportation have not demonstrated a bad record.
I am pleased that the nuclear industry has been given the freedom of going into the private sector. I am sure that it will use that freedom with skill and responsibility. The export potential is enormous. I am sure that, if the nuclear installations at Chernobyl had been designed and built by British engineers and operated to British safety standards, the problems that occurred there would not have arisen.
The disposal of nuclear waste is a world problem and those countries which are best equipped to deal with it safely and securely have a responsibility to mankind to perform that function. Safety is paramount in the nuclear industry, as everyone who works in the industry knows. Nuclear materials must be handled to the highest standards and, wherever possible, children must not be exposed to them. Scientists well understand the difference between alpha, gamma and beta emissions, and regulations must be made accordingly. Of course we must have joint training and, within reason, notification, but we must have regard to the costs imposed on the organisations concerned of excessive notification, and we must have clear lines of responsibility when something goes wrong.
Britain can be proud of its nuclear industry and the skill and inventive genius of the men and women who work in it, who have made and will continue to make a vital contribution to the well-being of mankind throughout the world.

Dr. Robert Spink: The transport and management of nuclear materials, where it is within the control of, for instance, British Nuclear Fuels Ltd., is conducted in a professional and responsible manner. That needs to be put on the record in view of some of the scaremongering comments made by Opposition Members.
As time is short, I shall concentrate on just one issue: waste substitution and BNFL's part in it. BNFL first proposed waste substitution to the Government in 1988. Since then, there has been considerable consultation, particularly that on the thermal oxide reprocessing plant, which was carried out by the Department of the Environment in 1993. The most recent consultation was carried out this year during the Government's review of radioactive waste management in the United Kingdom, when more than 250 representations were received from individual organisations.
This issue has therefore been well aired and carefully considered by the Government, who have now endorsed the waste substitution philosophy as the agreed, sensible and commonsense approach to returning nuclear waste to overseas customers. I welcome the fact that, in their White Paper on radioactive waste management policy, the Government fully accept the principle of waste substitution and integrate BNFL's proposals within their nuclear waste policy. So BNFL can now engage in waste substitution for intermediate and low-level waste. It can

have detailed discussions with customers about returning their waste in the most effective, practical and safe manner.
It might help if I outline some of the considerations surrounding waste substitution. The radioactivity contained within overseas customers' low and intermediate-level waste, which would be retained in the UK, will never be greater than the extra high-level waste that would be returned to customers. The required number of nuclear waste shipments overseas, which means shipments in this country as well, would therefore be cut from 1,000 to just 100—that is, decimated. That also saves the burning of 1.25 million tonnes of fuel oil, which would yield considerable improvements in terms of safety and economics. Although that is self-evident, let me spell out some of those improvements.
It would reduce transport and handling costs by several hundred million pounds and put BNFL in a strong position to win the £2 billion to £4 billion-worth of further export business that it seeks. Without substitution, BNFL would be at a considerable competitive disadvantage, particularly to Cogema, the French nuclear reprocessor. If BNFL were to get the business, as I hope it does—all hon. Members should hope the same—that would sustain 5,450 additional full-time jobs in the UK well into the next century. That is no small consideration.
The increase in low and intermediate-level waste would amount to less than 8 per cent. of total waste arising in the UK, and that waste could be easily accommodated in the Nirex repository without expanding it. Indeed, it amounts to only 5 per cent. of the capacity of the proposed repository. Since BNFL made its first waste substitution proposals, the volumes of waste arising each year at Sellafield have been cut by 30 per cent. through a programme of waste minimisation, which should be continued. If it is, as I believe that it will be, further substantial volume savings will be achievable.
Those are all important considerations. I congratulate the Government on their pragmatic, safety-first and putting-Britain-first approach to this problem. As my hon. Friend the Member for Shoreham (Mr. Stephen) said, the problem will not go away, so we must deal with it effectively. I urge the Government to set an early start date for the Nirex repository, as that would deal with some of the issues that Opposition Members have raised and would be in the best interests of the public, the industry and our economy.

Ms Joan Ruddock: I congratulate my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) on securing this important debate and on setting out so clearly the concerns of his constituents about disposal to landfill. I also congratulate my hon. Friend the Member for Nottingham, South (Mr. Simpson), who expressed his constituents' concern for safety in the transportation of nuclear materials.
This debate has focused on civil nuclear power generation and its waste, and waste arising from medical processes, but as the hon. Member for Shoreham (Mr. Stephen) reminded us, there is a link with the military programme. In an energy-rich nation such as Britain, the costs of a civil nuclear power programme would never have been justified had it not been for that link. Today, the many reasons advanced in favour of nuclear power


should not blind us to the fact that it has been an enormously expensive programme that has depended entirely on the public purse and given rise to lethal waste products.
Dealing with that waste presents a legacy for the future, which stretches far beyond the imagination of anyone here today. That is why ordinary people are, rightly, deeply concerned about both Government and commercial activities in this sector, and particularly about the secrecy that surrounds them.
As with all waste, the first discipline should be minimisation. Given that neither the present Administration nor the Opposition see a case for supporting new nuclear power stations, it is conceivable that, over a period, nuclear waste production may diminish. However, decommissioning of old nuclear power stations and obsolete military hardware means that the problem is likely to get worse.
It is difficult to obtain meaningful figures for nuclear waste. Nuclear waste is divided into three categories—high, intermediate and low level. Only low-level nuclear waste is disposed of. The other two categories are stored, as no safe method of disposal has been developed.
Will the Minister give us a clear account of the extent of radioactive waste production and future projections? Will he tell us whether the Government continue to stand by the 1991 inventory of radioactive wastes—that is, projected to 2030, that there would be 8,180 cu m of high-level waste, 208,000 cu m of intermediate-level waste and 1,420,000 cu m of low-level waste—and will he say whether that includes waste from the military programme? Will the Minister give us the projected costs of nuclear waste disposal and storage both from the civil and military programmes?
The safe decommissioning of obsolete nuclear installations presents us with a major challenge and a colossal cost—originally a cost recognised by Government, but now set aside in the drive to sell off anything to raise money for tax cuts.

Dr. Spink: indicated dissent.

Ms Ruddock: Yes; it is true.
Privatisation of the nuclear industry would be an act of gross irresponsibility. Major questions should be asked, not only about operational safety in a privatised industry, but about the enormously expensive disposal, storage and transport of nuclear waste arising from that industry.

Mr. Stephen: Will the hon. Lady give way?

Ms Ruddock: I cannot; there is no time.
The most extraordinary aspect of all the Government's plans to sell off the nuclear industry is that they dispose of public assets—no doubt yet again providing opportunities for fat cats to avail themselves of massive share options—while retaining at the taxpayer's expense all the current major liabilities of decommissioning the Magnox reactors.
In 1993, the National Audit Office report on the cost of decommissioning nuclear facilities estimated liabilities to Nuclear Electric, Scottish Nuclear and BNFL at £15 billion at 1992 prices, but will the Minister confirm that the United Kingdom Atomic Energy Authority's liabilities are estimated at a further £8 billion and that the generators' and BNFL's liabilities for management of spent fuel and nuclear waste are estimated at an even

higher figure than those that would arise from decommissioning? Taking all the categories together, will the Minister confirm that the gross lifetime cost of discharging nuclear liabilities is well in excess of £40 billion?
The Government, in retaining public responsibility for decommissioning the old power stations, are acknowledging that private industry will not pick up that price. What guarantee have we that in future a privatised industry will safely conduct those enterprises, dispose of the waste and so on? Is it not a fact that recently, faulty bloodbags have made a nonsense of the privatisation that is occurring within the national health service, and that in future, similar risks might be taken with potentially cheaper fuel flasks? Privatisation will exacerbate the already difficult, dangerous and costly problems of disposing and storing nuclear waste.
As to transport, the local authority associations said in their evidence to the nuclear review:
Every proposal for storage or disposal of radioactive material away from the site of origin … involves potential risks to the areas through which the material is to be transported to its next resting place—a factor which is equally relevant when the station is ultimately decommissioned".
The fears that the local authority associations expressed in that evidence have been well documented and spelt out by my hon. Friends in their speeches today.
We are deeply worried about the continuing incidents and accidents that do occur, no matter what the Government tell us. The National Radiological Protection Board records that, between 1964 and 1990, there were 406 transport accidents and incidents, 65 of which they identify as significant in terms of the severity or radiological consequences. This year, there has been a considerable number of disturbing incidents.
In March, Greenpeace discovered an unattended lorry containing spent nuclear fuel rods from Chapelcross. What is the Minister's reaction to the fact that the driver and security guards of that vehicle had taken a tea break?
Only a week later, a 22-tonne lorry carrying low-level waste overturned on the M5 north of Bristol. I am told that, as recently as last Friday, a train transporting nuclear waste from Dungeness to Sellafield was taken into a siding at Rugby because of "weird noises emanating from a fuel flask." Can the Minister confirm that incident and tell us what happened?
Nuclear waste transport is a cause of considerable anxiety in my constituency, through which irradiated nuclear fuel from Dungeness is carried on the Hither Green-Lewisham-Nunhead line twice a week, passing through highly populated areas and unstaffed and insecure stations. What does privatisation of the railways mean for the safety of that transport, given that we already know of a catalogue of incidents at the very least, if not potentially serious accidents?
Finally, I shall comment on the White Paper. Like my hon. Friends, I have questions for the Minister. We are told that the Government favour land disposal for the long-term management of vitrified high-level waste. Will the Minister tell us what is meant by
putting in hand the steps to develop and implement the necessary research strategy"?
What is the time scale—when will the development of that much-needed facility take place?
Will the Minister confirm something to which one of his hon. Friends alluded today—that the Government are prepared to allow high-level foreign nuclear waste to be stored in the United Kingdom?
Low-level nuclear waste was comprehensively discussed in the speech of my hon. Friend the Member for Attercliffe. His anxiety and that of his constituents about the possibility of disposal to landfill are entirely understandable. I trust that the Minister will reply to the pertinent questions that my hon. Friend posed, and those that were asked by myself and my hon. Friend the Member for Nottingham, South.
As the debate has shown, although we all have good reason to celebrate the victory of public pressure and good sense over landfill of low-level nuclear waste, major worries remain about the transport and safe disposal of a huge volume of highly dangerous and toxic nuclear waste.

The Parliamentary Under-Secretary of State for the Environment (Mr. James Clappison): I am glad to have the opportunity to wind up a debate on an important and interesting subject, and to have the opportunity to respond to the arguments of the hon. Member for Sheffield, Attercliffe (Mr. Betts). I am also glad to have had the opportunity to listen to the constructive and realistic points of view that were expressed by my hon. Friends the Members for Shoreham (Mr. Stephen) and for Castle Point (Dr. Spink) in their speeches.

Dr. Spink: It is extremely remiss of us that none of us have welcomed this most noble and honourable Minister to his new position.

Mr. Stephen: May I associate myself with those remarks?

Ms Ruddock: May I do so also?

Mr. Clappison: I am overcome by the kindness that has suddenly been showered on me from all directions.
As the House has heard, last week the Government published a White Paper containing the final conclusions of its review of radioactive waste management policy. The review was announced by my right hon. Friend the Secretary of State for the Environment in May 1994, and preliminary conclusions were published in a consultation paper in August 1994, to which the hon. Member for Attercliffe has referred at length. The final conclusions have been reached in the light of the responses that were received.
The purpose of the review was to examine policy in the light of changes since the Government's national strategy on radioactive waste management was published in 1984. The primary aim throughout has been to ensure that radioactive waste, irrespective of whether it is produced by public sector or private sector operations, is properly managed, and to ensure that people and the environment are not exposed to unacceptable risks now or in future. Those are the underlying principles.
As the House has heard, there are a number of categories of radioactive waste ranging from very low-level waste—including that to which the hon. Gentleman referred—from research or medicine, to

high-level waste from the reprocessing of spent nuclear fuel. The waste has the potential to cause harm and needs to be managed carefully.
The Government are committed to maintaining and developing a policy which ensures that radioactive wastes are not created unnecessarily; that such wastes as are created are managed and treated safely and appropriately; and that they are then safely disposed of at appropriate times and in appropriate ways. The Government will do that by means of a regulatory framework which ensures that producers and owners of radioactive waste fully meet their responsibilities and develop appropriate waste management strategies.
The Environment Bill, which is currently before Parliament, contains provisions that will streamline the handling of applications to dispose of radioactive wastes for nuclear licensed sites in England and Wales by making the new Environment Agency the sole authoriser, with the Ministry of Agriculture, Fisheries and Food and the Welsh Office as statutory consultees. The White Paper also says that developers of major projects may, if they wish, submit early applications for disposal authorisations and the regulators will then be able to decide on them before major commitments of money and effort have been made.
The review has confirmed the Government's commitment to disposal rather than indefinite storage of radioactive waste as the best means of meeting our commitments to future generations and therefore contributing to sustainable development. In the case of high-level waste, which British Nuclear Fuels plc is converting from liquid into glass, the waste must be stored for at least 50 years to allow for the short-lived radionuclides to decay and heat generation to reduce. However, after that the Government favour disposal to geological formations on land as the best option for the long term. We have said that we will put in hand the development of a research strategy to help us produce a statement of future intent, setting out the decisions to be taken and the milestones to be achieved.
In the case of intermediate-level waste, the Government consider it appropriate that Nirex should continue with its programme to identify a suitable site for a deep disposal facility. The Government have decided that no advantage would be gained from delaying the development of the repository itself and that, once a suitable site has been found, it should be constructed as soon as reasonably practicable. The precise timetable will depend on the granting of planning consent and compliance with regulatory requirements, including the establishment of a sound safety case. The Government have already promised to hold a full public inquiry into an application for the repository.
Disposal routes are already available for low-level waste which, depending on its concentration and level of activity, may go to BNFL's shallow disposal facility at Drigg in Cumbria or for "controlled burial" at suitable landfill sites.
I shall deal now with the points raised by the hon. Member for Attercliffe. A large number of members of the public have expressed concern about controlled burial. That form of disposal has been used for many years by non-nuclear industries which process raw materials containing natural radioactivity, and by major hospitals and universities for their relatively more active waste streams. The hon. Gentleman will be familiar with the


disposals by hospitals in Sheffield to the tip at Beighton, to which he referred. That method has also been used by BNFL for waste from its uranium enrichment and fuel fabrication plants and, at its Sellafield site, for lightly contaminated excavation spoil.
A site usually receives waste for controlled burial from no more than one or two sources. In considering an application for controlled burial, the regulators assess not only the type and activity of the waste but the containment characteristics of the site to which it is to be sent. If an authorisation is granted, the regulators also arrange for leachate from the sites to be monitored and for the results to be published.
It was proposed in the preliminary conclusions of the review that there would be an advantage in encouraging waste producers to make greater use of controlled burial in order to relieve needless pressure on the disposal capacity of BNFL's disposal facility at Drigg in Cumbria. Contrary to reports made at the time, that would not require new legislation; nor would it involve deregulation of the nuclear industry, as the route is already open to it and disposals would continue to be strictly controlled by the regulators. That is a very important point and the hon. Gentleman referred to it. There is a very tight system of regulation in place.
Although the proposal was supported by the Radioactive Waste Management Advisory Committee and the National Radiological Protection Board, the Government have recognised the genuine anxieties that their proposal has aroused among local residents and, for that reason, they have decided not to encourage greater use of controlled burial by the nuclear industry. Nevertheless, there are sound economic and radiological grounds for controlled burial and the Government believe that it should continue to be available as a disposal route, particularly for "small users"—such as hospitals, universities, research laboratories and non-nuclear industries—subject to the agreement of the site operators and to the necessary regulatory requirements being met.
I shall now deal in more detail with the points raised by the hon. Member for Attercliffe. He recognised and noted very fairly the Government's response in the White Paper following the consultations that have gone on since last August. The hon. Gentleman has clearly been involved in making representations and in the discussions that have taken place. The issues have been ventilated, and the hon. Gentleman will know from reading the White Paper that, while the Government recognise that nuclear waste can be disposed of safely in that type of landfill operation, they have made it clear that they are responding to public anxieties and the sorts of views expressed by the hon. Gentleman and are not encouraging the nuclear industry to use that disposal method. That point is plainly on the face of the White Paper.
The White Paper contains positive proposals for inviting the environment agencies to offer suggestions for making more transparent the information about which landfill sites receive such waste and for issuing formal guidance to the agencies about the need to consult local authorities about authorisations for controlled burial. The Government have no proposals to introduce legislation which would force private operators or local authority waste disposal companies to accept radioactive waste. I hope that the hon. Gentleman will be reassured by the White Paper on that point.
The White Paper proposes a policy of national self-sufficiency in dealing with radioactive waste. The Government believe that countries which are sophisticated enough to have a nuclear industry should also be able to develop their own waste facilities and that accepting their waste would reduce the incentive for them to develop facilities of their own. On the other hand, countries should not be precluded from taking advantage of the non-nuclear uses of radioactivity, such as medical diagnosis and treatment, simply because they do not have the resources to develop waste facilities. Equally, there may be sound technical reasons why waste should be imported for treatment, provided that there is no environmental detriment to the importing country. Certain exceptions will therefore be allowed.
Consistent with their policy of self-sufficiency is the Government's requirement that BNFL should exercise its return-of-waste clauses in contracts with foreign customers for the reprocessing of spent fuel. The Government have accepted that that policy can be implemented by waste substitution arrangements which ensure broad environmental neutrality for the United Kingdom, but they consider it prudent that they do not become irrevocably committed to waste substitution in the absence of appropriate disposal arrangements within the United Kingdom.
In agreeing equivalence between categories of waste, some additional high-level waste should also be returned over and above that calculated on radiological grounds alone in order to account for some minor non-radiological environmental consequences of substitution. Substitution does not mean that the United Kingdom will become a "nuclear dustbin", as some have alleged—far from it. The Government are adopting a properly cautious approach to ensure that there will be no environmental or radiological detriment to this country.
The hon. Member for Nottingham, South (Mr. Simpson) raised the question of transport. I apologise for dealing with it only briefly, but time is pressing. A strict regime is in place. Responsibility for policy concerning the safe transport of radioactive materials, including waste, is a matter for my right hon Friend the Secretary of State for Transport.
The movement of waste is governed by regulations recommended by the International Atomic Energy Agency. The purpose of the IAEA regulations is to ensure that the packaging for transport should adequately protect transport workers and the public under all foreseeable circumstances, including the occurrence of a severe accident. Rather than requiring the use of special vehicles or special routes, the regulations ensure that appropriate safety is built into the design of the package in which the radioactive material is carried.
The regulations specify design performance standards which are independent of the means of transport. Where the radioactivity to be contained exceeds specified levels, the standards include tests for demonstrating the ability of the container to withstand damage from involvement in a severe accident without any significant release of its contents or an increase in external radiation.
A national scheme, called the nuclear industry road emergency response plan, has been put in place to provide contingency arrangements in the event of a road accident involving radioactive materials. Its participants include a number of important publicly recognised organisations such as the Ministry of Defence, Nuclear Electric,


Rolls-Royce and Associates and Scottish Nuclear. Those organisations have agreed to dispatch qualified health physicists from the nearest organisation to deal immediately with any incident.
I shall write to the hon. Member for Nottingham, South setting out the details. I shall also write to the hon. Member for Lewisham, Deptford (Ms Ruddock) who raised many detailed points. It is a serious subject that involves long-range planning—

Madam Deputy Speaker (Dame Janet Fookes): Order. We must move on to the next topic.

1 pm

Mr. David Alton: Thank you, Madam Deputy Speaker, for enabling me to raise this issue in the House today. I also thank Madam Speaker and the Minister, who is in his place. I draw his attention to the all-party early-day motion 1380 tabled today by myself, the right Member for Selby (Mr. Alison) and the hon. Member for Workington (Mr. Campbell-Savours), who is in his place. It draws attention to the recommendation of Dr. Maria Fitzgerald in a report commissioned by the Department of Health that
the effects of trauma of any kind to the developing nervous system should be minimised as far as possible by whatever means are available.
The Minister should be congratulated on his Department's response to date on the issue of foetal pain. Let me explain the background. In 1988, the Department of Health commissioned a report from Dr. Fitzgerald, of the department of anatomy and developmental biology at University college, London—to whom I have just referred—on the evidence for foetal pain.
In 1994, a team led by Professor Fisk of the centre for foetal care at Queen Charlotte and Chelsea hospital, published pioneering work on
the level of response in the unborn to potentially painful procedure; intrauterine needling".
Its research concluded:
The human foetus feels pain in utero and may benefit from anaesthetic or analgesia for invasive procedures.
In the light of that research, Dr. Fitzgerald updated her report, and, in response to a question from the right hon. Member for Oxford, West and Abingdon (Mr. Patten)— who I am pleased to see in his place and to whom I am grateful for his encouragement and support in promoting this cause in the House—the Department lodged a copy of its findings in the Library of the House.
Dr. Fitzgerald finally concluded:
It cannot be denied that the foetal nervous system mounts clear protective responses to tissue injury and this cannot be ignored … If a foetus or a pre-term infant is to survive and mature into an adult it is essential to consider this issue. The effects of trauma of any kind on the developing nervous system should be minimised as far as possible by whatever means are available.
Today's debate is in response to that report. I should stress immediately that the debate is about foetal pain, and not about the Abortion Act 1967. My position on that legislation is perfectly clear, and I have never tried to hide it. However, there are a hundred and one other intra-uterine operations which can cause pain to the foetus.
Surely no one in the House would not wish to combat pain and suffering wherever they occur. As a parent, I have watched my own children on the ultrascan. For many of us, that is an increasingly common introduction to the wonders of the developing human being. I saw one of my sons at nine weeks' gestation, and I saw my daughter at 18 weeks' gestation. By that stage, the child is about a foot in length and pumping 50 pints of blood a day. Every single one of its organs is in place. The child is sentient, and responds to light and sound. It is most extraordinary that, with the aid of science, we can now see those marvellous developments in human characteristics.
There is no difference between a child at that stage in its development and any person in the Chamber, other than in terms of size and weight.

Mr. D. N. Campbell-Savours: The hon. Gentleman will know that I gave my maiden speech on this subject. It is an extremely important issue. Does he recall the film "The Silent Scream", which was produced seven or eight years ago, and was never given the coverage that it deserved? It proved quite conclusively that everyone in Britain and throughout the world should be considering that it is proven beyond doubt that the foetus feels pain, and something should be done to protect it from that pain.

Mr. Alton: I am grateful to the hon. Gentleman for raising that point. The film "The Silent Scream", and others like it, are subject almost to a conspiracy of silence. I cannot understand why it was never shown on our national television network, especially when one considers some of the programmes that are broadcast. We see every medical procedure known to mankind, so it is extraordinary that such a programme has not been given a wider audience.
I hope that, as a result of today's debate, others may take the time to search out that film and see it, but unfortunately—this corroborates what the hon. Gentleman has just said—there are those who attempt to sweep under the carpet the facts about foetal pain. That may explain why, despite the existence of evidence of foetal pain since the 1960s, we have statute law protecting foetal, larval or embryonic animals from any scientific procedure likely to cause pain, but none to protect the human foetus in the womb.
It seems extraordinary to me that, although some people and hon. Members find it credible that animal foetuses can feel pain, others balk at the notion that the human foetus also feels pain. I refer the House to the Animals (Scientific Procedures) Act 1986, for which most of us voted. It states:
Subject to the provisions of this section, 'a protected animal' for the purposes of this Act means any living vertebrate other than man.
It continues:
Subject to the provisions of this section, 'a regulated procedure' for the purposes of this Act means any experimental or other scientific applied to a protected animal which may have the effect of causing that animal pain, suffering, distress or lasting harm.
In the debate about when life ends, it states:
For the purposes of this section an animal shall be regarded as continuing to live until the permanent cessation of circulation or the destruction of its brain.
I cannot help thinking wryly that only when a seal is washed up on our shores holding a placard saying "Save the human race" will we see the illogicality of the decisions that we take. Crucial and important as animal welfare may be, the same rules should apply to our own species.
In an attempt to blur the issue, there are even attempts to argue that pain is almost a metaphysical experience, based on understanding and memory that the human foetus has not had the opportunity to develop. I hope that we can lay such bunkum to rest once and for all. I refer the House in particular to the pioneering work of Professor Kenneth McAull on the issue of foetal memory.
Pain is a physical fact. There are thousands of patients suffering from diseases such as Alzheimer's who have no memory or understanding of their plight. Despite that, they can experience physical pain, and any doctor who suggested otherwise would be in severe trouble.
The old chestnuts used to describe the human foetus as "a blob of jelly" or "a clump of cells" have long since been shown to be a parody of science. A human being, however small, who can react to light and disturbance and even show taste preferences, could never be described as a jelly.
There is more bad science peddled on the subject. Some attempt to argue that the foetus can feel pain only through the cerebral cortex. That notion is wildly outdated, following the most recent research showing that it is in the lower part of the brain, the thalamus, that pain receptors discharge electrical impulses telling the body to react to trauma and noxious stimuli. The earliest response from the thalamus occurs at the end of the seventh week of pregnancy.
Those who attempt to dismiss foetal ability to feel pain should take a lesson in science from Baroness Warnock and the Royal College of Obstetricians and Gynaecologists. When Baroness Warnock and her committee were attempting to settle a time limit for destructive experiments on the human embryo, one factor that they took into account was the embryo's capacity to feel pain. They state in their report:
As long as the embryo is incapable of feeling pain, it is argued that its treatment does not weigh in the balance.".
The report concludes:
The time limit for research on the embryo could be set either when the first beginnings of the central nervous system can be identified or when functional activity first occurs.
Expert evidence was sought from the Royal College of Gynaecologists, and the Warnock committee reported its findings:
The Royal College of Obstetricians and Gynaecologists suggested that embryos should not be allowed to develop in vitro beyond a limit of seventeen days, as this is the point at which early neural development begins.
In the light of that, and the recommendations not only of Professor Fisk's team but of the Department's own report, I suggest to the Minister modest and reasonable action that he could take that would settle the matter, I hope, once and for all.
First, a circular could be issued to health authorities and to doctors, drawing their attention to the conclusions of the latest research and recommending action to anaesthetise foetuses before any invasive procedure, such as needling or intra-uterine surgery liable to cause trauma to the foetus. Secondly, in the interest of a fully informed decision, any parents who are considering giving permission for such procedures should be alerted to the possibility that pain will be inflicted on their unborn child.
If such action was properly and promptly taken, and adequately complied with, it might not then prove necessary to write pain prevention for the human foetus into statute, as it is at the moment with animals. I should also warn the Minister that, if such action is not taken, this issue will not go away, and legislation may be the only way to ensure that the suffering and the pain currently inflicted on the foetus will be alleviated.

Mr. John Patten: I am glad to have the chance to intervene briefly and to make three points. First, I warmly congratulate my hon. Friend the Minister and his predecessors in the Department of Health on taking this issue seriously; on immediately


bringing before the House, in May this year, the most recent Department of Health report; on laying it in the Library; on making it publicly available; and on ensuring that there is no cover-up of the information that is available. My hon. Friend deserves our congratulations on that.
My second point flows directly from the first. The information is publicly available and the Department of health has, I understand, accepted the report that foetuses feel pain during various procedures in the uterus. Just suppose that information had been made publicly available that a drugs company had a product on the market, a product that was used by pregnant women and caused pain to the foetus. Imagine the uproar that there would have been: early-day motions in this place; screaming headlines about a new drugs company scandal; learned leaders opining that something must be done; and Ministers dragged from their beds early in the morning on to the "Today" programme to explain why nothing had been done.
I do not suggest that there is a conspiracy of silence by the media about this issue—after all, the report has been available for many weeks—but I have seen no mention of it in the public prints. I suggest to the House that there is a blanket of silence about the issue, and it should now be brought as quickly as possible to the public notice.
I am sure that the BBC will be giving proper notice tomorrow to the debate. This is a classic issue for my friend, Michael Grade, whom I personally greatly admire, to ensure that it is properly aired, for example, on Channel 4, so that the public are awakened to something that would be seen as a scandal if a drugs company were involved, but over which a heavy blanket of silence has been drawn.
Thirdly, I am sure that my hon. Friend the Minister would not seek to say that nothing should be done after the report. The first and most important thing to be done, as a matter of urgency in the coming weeks and months, is to give guidance to doctors, health authorities and trusts, and to private clinics as well, about the evidence shown by the report, to minimise the pain that foetuses may experience in all sorts of procedures, not just abortion. That is a matter of prime urgency.
Clear guidance should also be given to those who counsel mothers and fathers considering an abortion. One of the factors they should bear in mind and weigh in the balance when making that terrible decision—which many take but from which quite a few draw back—is that the procedure they are permitting and encouraging to go forward will involve pain to an unborn child.
They should have a clear understanding of that. It is a matter of prime importance. It is a considerable humanitarian issue, and the House expects a rapid reaction from Her Majesty's Government on it.

Dr. Robert Spink: rose—

Mr. Campbell-Savours: rose—

Madam Deputy Speaker (Dame Janet Fookes): Order. Can I be clear that hon. Members who are now seeking to catch my eye have the permission both of the organiser of the debate and of the Minister? It is also usual to inform the Chair in advance.

Mr. D. N. Campbell-Savours: I am sorry about that, Madam Deputy Speaker, because, as you know, I am always very deferential to the Chair.
The right hon. Member for Oxford, West and Abingdon (Mr. Patten) referred to do a conspiracy of silence. I believe that there is a conspiracy of silence. The reality is that it does not suit those who argue the right to choose—as freely as they would wish to exercise it—to have to consider the implications of foetal pain. That is the real world. It is an argument that is going on in America, here, and no doubt in other parts of western Europe. Only by publicising the issue will women face up to the responsibility of having to consider the implications of late abortion.

Dr. Robert Spink: I congratulate the hon. Member for Liverpool, Mossley Hill (Mr. Alton) on bringing the debate to the Floor of the House. It is a very important issue.
Although I very much respect the hon. Gentleman's intention not to focus on abortion this morning, we cannot ignore the fact that many methods of abortion will bring pain and much suffering to a foetus. We heard quite graphically about how a foetus can experience suffering and pain.
I would therefore ask the House to reflect on the attitude of women who sign up to the Labour party's "Emily's List", because, I believe, one of the conditions for signing that list is that the women who do so have to accept that they are pro-abortion, and that that has certain implications. That needs further investigation, and we should look at it extremely carefully, because it is an important area. It is something that the country deserves to learn about.
I thank you, Madam Deputy Speaker, for giving me the opportunity of raising that issue.

The Parliamentary Under-Secretary of State for Health (Mr. Tom Sackville): I congratulate the hon. Member for Liverpool, Mossley Hill (Mr. Alton) on his success in raising a topic which, as we know, he has raised in different ways in the House on many occasions and about which he feels very deeply.
Perhaps I should first make clear the Government's position on abortion, as the matter is germane. Parliament decided that abortions may lawfully be carried out in the circumstances set out in the Abortion Act 1967, as subsequently amended by the Human Fertilisation and Embryology Act 1990. The present provisions are in place as a result of a series of free votes in the House in 1967 and again in 1990. It was clear then and it is clear now that there are strongly held and widely differing views on the subject. In spite of that wide divergence, the Government must operate within a framework laid down by Parliament.
We have a duty to ensure that the provisions of the Act are properly applied until and unless Parliament chooses to change that law. In England, the operation of the Act is monitored closely by the Department of Health, through the Department's control of the private sector, and the investigation of specific complaints. Similar arrangements


apply in Scotland and Wales. Last year, the Department of Health reviewed and updated its arrangements for improving and inspecting places approved under the Abortion Act.
All medical practitioners carrying out terminations are required to notify the chief medical officer of each abortion they perform. The notification form includes the grounds for abortion, the method of treatment and the estimated gestation—that last point being particularly relevant to the matter that we are discussing today. The notification forms are scrutinised by staff authorised by the chief medical officer, to ensure that they do not indicate any contravention of the abortion law.
I am setting out the details of the Department's monitoring activities, because it is important for the House to understand the context and framework within which we operate. Monitoring is not a passive activity.
The Government do not take their responsibilities in this area lightly. We are conscious of the turmoil and worry that women face when they undergo termination of a pregnancy. We are sensitive to the feelings of those who oppose abortion. For many women, it is a tragic and difficult decision they face: it is no easy option. We recognise the importance of counselling for the women concerned, and all centres carrying out abortion or providing advice on abortion have guidelines on this important prerequisite. Furthermore, if an abortion has to take place, distressing though that may be, the earlier in pregnancy the better for all concerned.
There have been developments since the 1967 Act. The viability of the foetus at 24 weeks has been recognised, and for the great majority of cases that is the upper limit for termination. Medical, in contrast to surgical, termination has become available. In other words, for late terminations, drugs can be used to terminate the pregnancy instead of surgery.

Mr. Alton: As the Minister is setting out the record, I am sure that he will also want to make it clear that, since 1990, abortion is allowed right up to and even during birth on a handicapped baby.

Mr. Sackville: I am aware of that, but I reiterate that the vast majority of terminations are much earlier.
Some people who oppose abortion claim that those who accept it simply have no regard for human life. That is not the case for the Government.

Mr. Campbell-Savours: On a point of order, Madam Deputy Speaker. Will the Minister bring his speech to the issue of foetal pain, which is what we are here to debate?

Madam Deputy Speaker (Dame Janet Fookes): I have been following carefully, and my understanding was that the Minister was seeking to sketch in the background. One must also bear in mind the fact that there is rather more latitude in Adjournment debates than there might be on other occasions.

Mr. Sackville: Thank you, Madam Deputy Speaker.
I want to illustrate the fact that the Government listen to all views by reminding the House that the Department of Health responded quickly to representations from the hon. Member for Mossley Hill on the disposal of foetuses after termination of pregnancy. All centres carrying out termination have clear instructions. Full account must be taken of any personal wishes expressed. I am sure that all

hon. Members accept that respect is due to the dead foetus based on its loss of potential for development into a fully formed human being.
We must always take the humane view in all aspects of the termination of pregnancy. For that reason, the topic raised by the hon. Gentleman for debate this afternoon deserves careful consideration, the question being whether the foetus experiences pain.
The House has heard today mention of an article in The Lancet of 9 July 1994 entitled "Fetal Plasma Cortisol and Beta—endorphin response to intra-uterine needling". The work reported in The Lancet is a welcome addition to our knowledge on the subject. However, one of the dangers with any such issue is that conclusions may be jumped to which are not justified by the evidence. Therefore, let us consider for a moment the main conclusions of the article.
The studies involved relate to life-saving blood transfusions before a baby was born, not to abortion. One process required the passing of a needle which carried the blood into the foetus's abdomen. That process was compared with another whereby the blood transfusion was via the umbilical cord. The comparison is important, because the umbilical cord has no nerves.
The hormonal response was then measured—the actual measurement being the concentration of cortisol and beta-endorphin, the substances referred to in the title of the article in The Lancet. A known physiological response to stress is the production of those substances in the blood.
The researchers found that in neither case did the concentrations of cortisol and beta-endorphin increase in the first 10 minutes of the transfusion. However, after 10 minutes, a substantial increase was observed when the transfusion was via the abdomen of the foetus. The study suggests that the foetus mounts a hormonal stress response to invasive procedures. What the study does not tell us is whether the foetus can be said to feel pain.
Other studies have shown that those parts of the brain that may recognise pain are developing in the second three months of pregnancy, but some of the anatomical changes can be recognised only beyond the end of that period. However, the fundamental question of when the foetus is conscious of feelings remains incompletely resolved.

Mrs. Helen Jackson: I am grateful now for not being the only woman, besides yourself, Madam Deputy Speaker, in the House today to be considering a subject which is of major importance to women in particular.
Does the Minister agree that the study in The Lancet to which he has referred is a study of foetuses over 23 weeks, and that any connection between that study and a general opposition to the present legal right to abortion in this country would be inappropriate, because late abortions are not only undertaken with extreme distress and unwillingly by women, but also only in rare cases where there is foetal abnormality anyway?

Mr. Sackville: I have already made that distinction clear. Most abortions are now below 24 weeks. There have to be unusual grounds for late abortions.
This is a matter which is clearly worthy of research. The Medical Research Council is always ready to consider soundly based research proposals. In the meantime—

Dr. Spink: Will my hon. Friend give way?

Mr. Sackville: I must carry on, because I want to continue my argument.
In the meantime, I feel sure that the study to which the hon. Member for Mossley Hill has drawn attention will have been studied carefully by obstetricians and gynaecologists, as well as anaesthetists who are involved with invasive clinical procedures.
In 1988, a report on sensory development in the human foetus was prepared, as has been said, for the Department by Dr. Maria Fitzgerald in connection with the report of the committee to review the guidance on the research use of foetuses—the Polkinghorne report. In the light of recent interest in the subject, we asked Dr. Fitzgerald to update her earlier commentary. A copy of that updated report has been placed in the Library. It continues to support the view that, up to 26 weeks, the foetus does not feel pain.
A necessary prerequisite for pain perception is considered to be the presence of mature neural pathways to the cortex of the brain. In the human foetus, the relevant nerve fibres begin to reach that cortex only from 26 weeks' gestation. Before that, foetal movement in response to stimuli should be regarded as a reflex involving peripheral nerves and the spinal cord.
All these matters are open to different interpretations. What has appeared in an early-day motion may put Dr. Fitzgerald's recent report in a slightly different light. In its summary and conclusions, she says:
The existing evidence shows that little sensory input reaches the developing cortex before 26 weeks and therefore these reactions to noxious stimuli cannot be interpreted as 'feeling' or perceiving pain.
While I appreciate what my right hon. Friend the Member for Oxford, West and Abingdon (Mr. Patten) said about the need to acquaint health authorities and parents with the latest science, I stress that those conclusions do not support the view that, before 26 weeks, foetuses feel or perceive pain. I am afraid that we must view the subject within that context.

Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order. We now move to the next debate.

Gilts and Bonds (Taxation)

Mr. Tim Smith: I welcome my hon. Friend the Financial Secretary to the Treasury, who now has one of the most fascinating jobs in Government. There is no doubt about the importance of taxation. My hon. Friend has probably already discovered the difficulty of reconciling the various principles: we all want simplification, but we also want fairness. The subject of taxation of gilts and bonds illustrates that difficulty very well.
This may seem a somewhat technical subject, but it is important. A surprising number of private investors have holdings in gilts—three quarters of a million, I understand. Many others have holdings in zero-dividend preference shares, and use both gilts and those other instruments for the purposes of legitimate financial planning arrangements.
When my hon. Friend's predecessor published a consultative document on the subject on 25 May, it provoked considerable interest. I entirely support the twin objectives contained in its proposals. The first was to simplify taxes by sweeping away 100 pages of legislation dealing with the taxation of different financial instruments, and stating that no distinction would be made between capital and revenue in regard to gilts and bonds: the whole lot would be taxed as one.
That was clearly straightforward, but it involved a major extension of tax. I rather agree with The Daily Telegraph, which said yesterday that, if matters were to be simplified, it was probably better to abolish taxes than to extend them. Nevertheless, I support the objective.
My right hon. Friend the Member for Ealing, Acton (Sir G. Young) said:
The current tax rules for gilts and bonds originate in the 19th century. As the financial markets and the tax system have evolved, more and more special rules have been added.
If that is the case, the whole thing had become very complex.
The second objective was to support the establishment of a gilt strips market, and to facilitate the development of new varieties of bond in the market, to ensure that London remained a leading financial centre. You may not know what "strip" means in this context, Mr. Deputy Speaker. There is a helpful definition at the bottom of page 3 of the Bank of England's consultative document:
Originally 'stripping' referred to the practice of physically stripping coupons from a bearer bond certificate. As the US market developed, the term 'STRIPS' was employed to stand for Separate Trading of Registered Interest and Principal of Securities.
You are now fully au fait with the term, Mr. Deputy Speaker.
A serious point is embodied in that objective, quite apart from the wish to ensure that London remains a successful financial centre. The hon. Member for Edinburgh, Central (Mr. Darling) will recall much discussion in the Standing Committee on the Finance Bill earlier in the year about the gilts repo market. All the changes involved the laudable aim of reducing the Government's funding costs by trying to ensure that the instruments available to investors matched their needs as far as possible.
The reform was simple. The idea was, and still is, that all profits should be treated as income and all losses should be relievable. What caused concern was the extension of the proposals to cover private investors. Professional investors can cope with complex financial instruments and, indeed, complex taxation; it is much more difficult for private investors to do so. The document proposed the extension of the proposals to all private investors, subject only to a fairly low threshold: a nominal value of about £20,000-worth of gilts was suggested.
That prompted two sets of concerns, about the substance and about the timetable. I would not say that lower coupon gilts designed for the private sector had been marketed by the Government, but there is no doubt that they were introduced for the benefit of the private investor and, in particular, for higher rate taxpayers, on the understanding that they would not be subject to capital gains tax. There was a problem for those who held gilts individually, and a major problem for collective investment schemes. Many people prefer to invest through either a unit trust or an investment trust.
The second concern related to the fact that people had been asked to respond by 30 June to a consultative document published on 25 May. I believe that, notwithstanding the timetable, some 400 people have responded. My right hon. Friend the Member for Acton said that he would make a decision soon after that date, which prompted a worry about parliamentary consideration: it was clear that, by the time the Finance Bill went into Committee in January next year, all would be signed, sealed and delivered, and we would be considering it retrospectively. We ought to have the opportunity to consider such a major change before its full implementation.
I do not particularly like legislation by press release. It is fair enough if the Inland Revenue discovers some major source of tax avoidance and wants to clamp down on it quickly, but a major change such as this should not be introduced in a press release. Another important consideration is the operative date: when such changes are made, taxpayers should be allowed a reasonable period in which to reorganise their affairs.
On Monday afternoon, my hon. Friend the Financial Secretary and my right hon. and learned Friend the Chancellor of the Exchequer announced major alterations to the proposals. I congratulate my hon. Friend on the speed with which he has moved since his appointment to deal with the matter; however, it could be said that, after having to deal with the problems of Cornish fishermen, he finds dealing with the men from the Inland Revenue a doddle.
In Monday's press release, the Chancellor dealt with most of the major concerns expressed by those who commented on the consultative document. The vast majority of private investors will now have to pay income tax on interest only, as a £200,000 threshold is to be introduced. That will leave only 4,000 private investors subject to the new regime. Why, however, does my hon. Friend consider a threshold necessary? Why can there not be a separate regime for private investors generally?
I have received a number of letters from constituents about that. One, who had chosen to invest in gilts the wealth that he had created during a lifetime in business, told me that he had an investment of £1.5 million. I think that we should welcome the fact that people are prepared

to support the Government's funding requirement in that way, and I am not sure why my constituent should be subject to the new regime simply because he has a large holding.
None the less, the change is extremely welcome, exempting as it does the vast majority of taxpayers, and so is the proposal—this could be the answer to my constituent, who has such a large holding—to exempt two particular low coupon gilts: the 3.5 per cent. 1999–2004 and 5.5 per cent. 2008–12 because they are held by private investors in particular. I suppose that one could say to my constituent that he could choose to switch into those two, although some cost would be involved.
Unit trusts that are wholly dedicated to gilt and bond investment are also to be excluded from the new regime. That, too, is extremely welcome, as is the fact that zero-coupon preference shares will be excluded. Some details are to be sorted out in relation to the transition. I am sure that my hon. Friend will now be familiar with what is known as the kink test. That will have to be considered. As with all these things, we shall have to ensure that we do not have a regime that is subject to abuse. That is extremely important.
I should like to mention the position of investment trusts, because, unless I have missed something, I do not think that Monday's announcement referred to them. Of course, a number of them also invest in gilts and bonds, and it is therefore not surprising that the Association of Investment Trust Companies is still concerned. A letter that it has sent me today states:
under the proposed rules investment trusts will be subject to taxation on capital gains on holdings of gilts and bonds.
The key principle underpinning the taxation of investment trusts has always been that, wherever possible, investors should not be any worse off should they choose to invest indirectly through an investment trust, than if they had chosen to invest directly in the underlying investments.
As they presently stand, however:
The government's proposals would run counter to this principle as investors would be exposed to double taxation".
They would be paying capital gains tax inside the trust, and then capital gains when they sold their shares in the trust. I hope that the Minister will consider that point, because a strong case exists for putting investment trusts on the same footing as unit trusts.
Of course, there is a difficulty when one gets collective investment vehicles that invest partly in gilts and bonds and partly in equities. It is for that reason, and also because it is important that Parliament should have an opportunity to consider the proposals in detail, that the change in the implementation date, which was announced on Monday afternoon, is most welcome.
The proposals will not come into force until 1 April next year for institutions and 6 April for individuals. That will both provide an opportunity for some of the detailed technical matters relating to collective investment vehicles and other matters to be sorted out, and ensure that we have full parliamentary debate on all the details. That is a much more sensible way to proceed.
First, I welcome the change, because the objectives are entirely laudable: secondly, I welcome the amendments that the Chancellor of the Exchequer has proposed, because we will have a sensible system that will allow some simplification—although, inevitably, there will be more legislation than there would have been. As I said, however, that is the problem if one wants to have equity.


The proposal will encourage the development of the strips market in the City, and reduce the cost of borrowing to the Government.

The Financial Secretary to the Treasury (Mr. Michael Jack): I thank my hon. Friend the Member for Beaconsfield (Mr. Smith) for his kind warm words of welcome. He is entirely right that this is my first appearance in my new role at the Dispatch Box. May I also say how pleased I am that the hon. Member for Edinburgh, Central (Mr. Darling) is here as well? I am sure that we will debate matters across the Dispatch Box in perhaps more combative terms than today.
This is not, however, my first parliamentary outing since joining the Treasury, as, within but a few hours of my appointment, I was debating a double taxation agreement on the subject of Bolivia and Belarus. I think that, at that point, I realised, in the nicest sense, what I had let myself in for in transferring my responsibilities from Cornish fishermen, who showed their dissent by throwing things at me, to this more esoteric world. I have yet to find out what angry taxpayers do.
I congratulate my hon. Friend on securing this Adjournment debate on this important subject. In considering his correspondence in the Treasury, I am conscious of the substantial amount of campaigning that he has done on this issue on behalf of private investors in gilts and bonds. I also acknowledge his particular interest in tax matters in general, which his opening remarks attested to, and in the special subject of tax simplification.
As my hon. Friend said, not only does this proposal offer us a way forward in that subject, but Monday's announcement shows that my right hon. and learned Friend the Chancellor of the Exchequer, my right hon. Friend who preceded me in my job and I listened carefully to all the views expressed on this important matter.
Before responding to my hon. Friend's sage remarks on this subject, I hope that the House will allow me to explain briefly what the Treasury hopes to achieve by the reforms outlined in this sector.
There were two main objectives. The first was to simplify the tax rules in this sector to provide a more straightforward and coherent regime. At present, taxpayers must grapple with, as I am discovering, many arcane mysteries: deep gain securities, deep discount securities, qualifying convertible securities, the accrued income scheme, and much, much more. When each set of rules was introduced, there was good reason for it, but the overall effect is now a mountain of complexity, full of anomalies, tax traps for the unwary, and scope for avoidance.
With our announcement on Monday, we see the prospect of major deregulatory gains sweeping away the hundreds of pages of legislation that my hon. Friend referred to, and having a much simpler, shorter and more intelligible tax code as a result.
The second objective is, as my hon. Friend said, to free up the financial markets for new developments. There is a clear demand, from both issuers and investors, for new types of financial investment.
To give just one example, some people have said that they would like to see the issue of "limited price index bonds". Those are bonds where the maturity value is

indexed within a pre-set limit. They could be of value in financing large capital projects and in meeting the needs of long-term institutional investors, but at present the tax rules get in the way. My hon. Friend also put his finger on another important point—the potential for the Government to reduce the cost of their borrowing.
Another example is an official market in gilt strips, which again my hon. Friend mentioned. I must admit that I too worried when I first came across that piece of terminology, but he provided us with an extremely good explanation of it. As he said, that is an official facility to trade separately in both the right to capital associated with a gilt, and in the rights to receive interest. Other countries, notably the United States of America and France, have introduced an official strips market with considerable success, but the United Kingdom's current tax rules get in the way of such developments.
There is a clear demand for such innovations, and we need to allow them to take place if the UK is to stay competitive in world financial markets, but it is difficult to cater for them without having some radical tax reform.
Under the proposals, both the Government and private companies can benefit. Companies issuing debt would receive full relief for their borrowing costs. The present obscure distinction between different types of bond will largely disappear, and income and profits received by lenders will be treated as income, with the additional benefit that any capital losses made by lenders will be relieved.
Thus the distinction between capital and income will be removed for bonds. That distinction makes good sense for shares and for real property; it is doubtful whether it makes much sense for bond-type lending, where the likely returns are more predictable from the outset. The result will be a simpler system in which tax factors interfere much less with normal commercial decisions, and in which market innovations such as those I have mentioned can take place.
All that is for companies as issuers and holders of such investments, but we were always clear that something much less sophisticated would be necessary for private investors, and that, for the great majority of them with relatively modest holdings, it would be sensible to continue taxing them, in general, only on interest income, much as now.
To test reactions to the proposals in my hon. Friend's speech, the Inland Revenue and the Bank of England issued consultative papers on 25 May. In response, companies and tax practitioners strongly endorsed the reform in principle for professional investors, but two reservations came through very clearly.
First, there were widespread calls for implementation to be deferred to give a further opportunity for consultation on matters of important detail, and to give the House full scope to examine the results. I am grateful to my hon. Friend the Member for Beaconsfield for his comments on that. Deferral will also allow firms and individuals to approach the start date with reasonable certainty about what they are taking on.
Secondly, while the ideas were welcomed by business and the financial markets, concern was expressed by private investors who felt that the proposals might adversely affect them. They were particularly concerned that their investment expectations could be disrupted, as they had planned their existing portfolios against the


background of the tax rules that have applied to date. Some called for a higher threshold than the one that was mentioned in the consultation document, while others pressed the particular claims of investors in low-coupon gilts. Others urged us not to disturb the debt/equity borderline, and to leave the current taxation of shares, including zero-coupon preference shares, unchanged.
Those concerns were carefully considered by my predecessor, my right hon. Friend the Member for Ealing, Acton (Sir G. Young), who is now Secretary of State for Transport, and my right hon. and learned Friend the Chancellor. I hope that my hon. Friend the Member for Beaconsfield agrees that those concerns were addressed by the Chancellor's announcement on Monday. I hope that it will be helpful to the House to set out the details of his announcement.
There will be a generous threshold of £200,000 for private investors. That will ensure that probably no more than 4,000 private investors will fall within the scope of the changes. I shall develop that point later in answering my hon. Friend's question about why there should be a line at all above which some private investors will be included.
Two gilts with a particularly low coupon are to be excluded altogether. Those have long been held by private investors, and assurances about their tax treatment were given by a previous Administration. There will be no change in the debt/equity border line. Therefore, there will be no change in the present treatment of zero-coupon preference shares or, indeed, any other type of share. I hope that that underlines the reassurance that my hon. Friend derived from Monday's announcement.
The start date for all these changes has been deferred until April next year. Consultations on the details of the proposals will continue until that date, giving people more opportunity to prepare for the changes and to voice any remaining concerns. I hope that my hon. Friend, who has considerable expertise and interest in these matters, will participate in that exercise. Where valuations are needed, they will be carried out in April 1996.
Some hon. Members have expressed concern about the impact of the changes on collective investment vehicles—in particular on the need to avoid the double taxation of gilts and bonds that are held by such vehicles. My hon. Friend spoke about that. We envisage that unit trusts that are invested predominantly in gilts and bonds will, as taxpayers, be wholly outside the new rules. They will be treated in the hands of investors as a sort of synthetic bond that is subject to the new rules, but included, in the case of private investors, in the generous threshold provisions that we propose.
That ensures that collective schemes will continue to offer efficient access to the full range of PEP opportunities, including corporate bond PEPs which are deservedly attracting so much attention. It also gives bond funds equivalent treatment in competing with direct investment in gilts and bonds outside PEPs.
I appreciate that there are some further concerns in the unit trust and investment trust sectors. That is one reason why we are deferring the start date until April next year. As I have said, that will allow additional consultation on the details of the proposals to continue. Given a constructive approach in future discussions, I am confident that we can find whatever further detailed adaptations may be necessary.
The end result of the Chancellor's proposals is that, essentially, there will be no change in the way in which the overwhelming majority of private investors are presently treated. I trust that the House welcomes the proposals. The outcome has been widely welcomed outside. My hon. Friend quoted from a well-known national newspaper, so I shall reciprocate by quoting from another.
The view of the Financial Times was:
Most private investors have been given everything they wanted from the changes to the gilt tax proposals".
The paper said that it was
a victory for private clients and common sense".
Many professionals have welcomed the further opportunity for consultation on details and the prospects for progress—now confirmed—towards the gilt strip facility which I and my hon. Friend the Member for Beaconsfield have described. I am glad to hear that my hon. Friend's main concerns have been met.
In the context of valuations, he asked whether the so-called kink test fits well with gilt strips—we must leave others to judge the terminology. The issue is of some interest to my hon. Friend, but I hope that he will forgive me if I do not give a precise answer now. I am aware of some questions about the issue.
The fate of the so-called kink test is tied up with wider questions about the handling of the transition that the Revenue will need to develop and discuss further. It is our firm priority that the transitional rules should be seen to be fair and workable. I am sure that my hon. Friend will contribute to that debate.
He also asked about the drawing of the line, and whether any private investors should be included in the reform. As I think he understands, some 4,000 people will be above the threshold. In setting any line, there is always an element of judgment, but a high threshold has two results. It protects the Exchequer, while retaining the bare minimum of detailed provision to deter tax-driven investment strategies.
With no threshold at all, we would face an unattractive choice between open-ended Exchequer costs and retaining or even increasing the full and sometimes ugly apparatus that we all want to get rid of. We think that the threshold that we have chosen for private investors strikes the right balance between cost and complexity and the concerns of private investors.
My hon. Friend said that, for those above the threshold, the larger investors, there will be an additional gain, in that any capital losses that they may have incurred will be eligible for relief under the proposals. That may appeal to his friend who has a large holding.
We have set out the basic principles. There are many matters to discuss and much detail to fill in, as the ideas are worked up into their full legislative form. Many of those ideas are outlined in the Revenue's press release that was issued at the beginning of the week, and the Revenue will approach them all in a constructive spirit.
This is a valuable reform. It will improve the competitiveness of the City and make life simpler and easier for companies. At the same time, it must respect the concerns of private investors, and I think that our package achieves that proper balance. I am grateful to my hon. Friend for continuing to press this matter in debate, and for giving me the opportunity to put on record the current position on this important matter.

Cannabis (Therapeutic Use)

Mr. Paul Flynn: This is a matter of enormous importance because it affects the suffering of many thousands of people in Britain. By a simple decision made now by the Minister, we can today not take any path that is new or daring but go back to the position that existed in 1971. By doing so, we will decriminalise not the recreational use of cannabis but many people who use cannabis now because they regard it as essential for their needs or their family needs. Those people will stop being branded as criminals. Now they seem to be breaking the law.
Perhaps it is best to say what we are not proposing or debating this afternoon. There is no question of any proposal to decriminalise cannabis or increase its availability as a recreational drug. Neither is there a proposal to make cannabis available as a medicine on every chemist's counter for every minor complaint such as headaches, stomach aches or whatever. We are urging the Minister and the Government today to allow cannabis to be prescribed for a certain number of identifiable conditions that are all serious. Those conditions are multiple sclerosis, glaucoma, the effects of chemotherapy, cerebral palsy, spasm and terminal illnesses.
We know that a strong demand for decriminalisation is coming from the association that has been set up to make the point. The demand rightly comes not from politicians but from patients, from the families of patients and from the medical profession. We are debating the matter today because a meeting of the Alliance for Cannabis Therapeutics took place in October last year at which I believe that the Minister was present. He answered questions at the meeting and he has answered parliamentary questions on the matter.
We want to take the issue forward from what was said at that meeting. I understand that it was a friendly meeting and people shared a great deal of common ground. An all-party group went along to the meeting. It included members of two parties and a letter of support was sent by a third party. Today I have received expressions of support from hon. Members in all parties in the House. So the matter is not party political.
The Government agree with our main case, which is that cannabis is effective in relieving pain. There is a wealth of evidence that for certain patients afflicted by one of the illnesses that I have mentioned cannabis provides a unique palliative for the torments of pain. The measures that we advocate can be introduced without interfering with Government policy. We accept the reality of Government policy on all drugs, but we believe that our argument today chimes precisely with Government policies on drugs, Home Office policies and even the Government's policies on deregulation and choice.
At the meeting with the alliance, the Government side accepted the therapeutic qualities of drugs. Their objections included one from the Home Office that any move to allow cannabis to be prescribed therapeutically would send a wrong signal to the rest of the country. The Government representatives also said that the Department of Health did not want to give any approval to smoking. I believe that those arguments can be answered well.
Cannabis was prescribed until 1971. Whatever signal was given then had no apparent effect. There was not a sudden rash of cannabis taking or abuse because it was

prescribed to a small number of people, just as it would be prescribed if our plea today was accepted. There is clearly an understanding in the minds of the public and the medical profession of the distinction between cannabis for recreational use and cannabis for therapeutic use.
No poll of any great merit has ever suggested that recreational use of cannabis is regarded by the majority of the public as desirable. However, a poll in The Independent some time ago showed that 75 per cent. of all doctors and 70 per cent. of the general public wanted to see cannabis prescribed therapeutically. So the distinction exists in people's minds. We do not have to worry about wrong signals.
I agree entirely with Ministers about smoking. No one in the House wants to increase the number of smokers of anything—herbs, tobacco or cannabis. Smoking any substance brings the same problems of bronchitis and heart disease, even if not cancer, but that is not the point. We know that cannabis can be used in a variety of ways. A vaporiser is used in America. There are inhalers. Cannabis can be taken in the form of a food, a drink, a patch or a tincture. Those are all acceptable ways to divorce therapeutic use from the recreational use of cannabis. So smoking is not the problem.
Distinguished scientists attended the meeting at the Department of Health. Professor Wall, a distinguished scientist at St. Thomas's, gave interesting evidence on which he has since enlarged on—I hesitate to use the word—endogenous receptors in the brain. He made the point that the arguments were not the same old arguments which were about in the 1970s and 1960s. When cannabis was withdrawn, it was not because it was thought that prescribing it sent the wrong signals but because it was used only as a sedative at that time. Various other sedatives were available, so there was no need to prescribe cannabis as a sedative.
New knowledge about cannabis has been discovered in the past 25 years. According to the theory of endogenous receptors, our brains can produce one of the active elements in cannabis. We are all familiar with the odd moments of unexplained joy and euphoria that we have from time to time—frequently in the House, of course. Our bodies are remarkably clever machines. They can produce all kinds of chemicals, including many painkillers. So we know that there is a natural source of an element of cannabis in our bodies.
One of the objections, strangely enough, to the derivative of cannabis that has been used—nabaline—is that, although it is a part of cannabis, it has caused more problems than natural cannabis. So there is a strong case for using cannabis in its natural state. Dr. William Northcott, who is an expert in treatment of pain and runs a pain clinic, said that he saw many patients who did not respond in any way to conventional medicine, but who obtained relief as a result of cannabis, which he could not prescribe, although he routinely prescribed much more powerful and addictive drugs, including heroine and cocaine. So the mild, non-addictive drug is banned and the more powerful addictive drugs are permitted—and used in enormous quantities.
The Government have used the argument about willow bark, which is an interesting one. They say that cannabis is a complex substance, and it is indeed complex. There was a time when people sucked willow bark to obtain the active substance in it, which is aspirin. We can go on from there and say that we cannot delay any longer removing


the ban on cannabis. It is used today by thousands of people. It has been used since the time of the Assyrians. It has been used for at least 5,000 years. The people who built the pyramids in Egypt knew that cannabis was good for eyes. It was used for what is now known as glaucoma. It reduces the pressure in the eyes by as much as a third. The Egyptians knew that then. We lost that knowledge. It was a forgotten medicine, but we know about it now. It was used by tens of millions of people in every continent for thousands of years. There is not one case of anyone being poisoned by it or having a toxic reaction to it.
We need more research. I am sure that the Minister will say that in his speech. We need to understand which of the substances in cannabis are psychoactive and which are analgesic. But that is no excuse for delaying allowing cannabis to be used in its natural form.

Mr. Austin Mitchell: I do not oppose my hon. Friend's argument. Indeed, I strongly support it and I took a delegation to the Minister at the end of last year. My hon. Friend is exactly on the point. Cannabis should be available on prescription under medical supervision for the relief of pain for certain specified conditions. That is all that we ask. Even if the Government's reason for the long delay in considering that proposal is that more research is needed, it will be difficult to carry out research unless cannabis is available, as it was before 1973, for the treatment of those specific conditions. The research is conditional on the availability.

Mr. Flynn: My hon. Friend is right. There have been strict limits on availability. At the time of the meeting it was not available at all.
It is fascinating that pain specialists have pointed out that they are well used to using drugs which have not been formally trialed or even licensed. The gentleman to whom I referred previously said that, with the majority of his patients, only single trials are conducted before a treatment is introduced. If that did not happen, the treatment that he gives in his pain clinic would be stopped in its tracks. He has to continue to use drugs such as amitriptoline, depo-medrone, sodium valproate, clobazam and flecainide which are unlicensed for use in pain relief. If that can be justified, so can the use of cannabis in its present form.
The most persuasive evidence does not come from the great litany of experts and bodies of chemists who want this change and whom I could spend the rest of the afternoon quoting. More persuasive is the evidence of people who are criminals in the eyes of the law, who are listening to us now and whose lives have been affected by cannabis.
One of the most moving articles that I have ever read was by Carol Howard, who is listening to me now, about the death of her daughter Sara, Sara was in her 20s and died of a rare cancer. She was nursed by her mother. She suffered chemotherapy in the final period of her life and her mother writes movingly in a searing document about her. Her mother used cannabis to help that young woman and has told me within the last hour of that fact. She says that cannabis was the only drug that provided any true or lasting relief. However, in the final phase of her illness that young person was filled with heroin and morphine in a form that has a devastating effect on people. If the choice is between morphine, which often turns people in addition to their health problems into zombies and using

a drug which allows them to continue to converse and communicate with loved ones into their final hours, why on earth can we not allow people to continue to use it?
There is another lady who uses the drug. She is the mother of two teenage children and finds that the only relief that she can have from multiple sclerosis and its many symptoms is to use cannabis.

Mr. Michael Connarty: I am grateful to my hon. Friend and congratulate him on obtaining a debate on this very important subject. It has been said that beta interferon, which people are pleading to have available on prescription in this country for sufferers from multiple sclerosis, will not be available until it has been through trials. People find that they can get relief from some of the most dangerous and soul-destroying tremors of MS by using cannabis. If the Government are determined to trial beta interferon and probably delay its use for another decade, they should hear this plea for the use of cannabis as a prescribed drug for MS.

Mr. Flynn: My hon. Friend is right. I wrote an article recently in The Independent about drugs in general. As someone who is fanatically opposed to the taking of medicinal drugs, I tried to make the point that there are only two sorts of drugs: those that we know have very nasty side-effects and those whose nasty side-effects we have yet to discover. We know that there are problems with every possible drug that we can discuss. No drug that civilisation has encountered has had the trial in practical circumstances that cannabis sativa has had. It has been used by many people over a period of years without the reactions which have occurred with thalidomide, eraldin, opren and a whole host of other drugs which have made a lot of money for the drugs trade but have poisoned and killed many people.

Mrs. Teresa Gorman: I sympathise with the hon. Gentleman's point. That is why I have come to hear the debate. I apologise for being a little late. Is it not true that hemp drugs such as cannabis, which are widely used in the east, especially in India, are natural drugs and that the opiates which are widely used in and China and the far east are natural substances? We tolerate alcohol and tobacco, which are acceptable drugs in our society. Is there not a big difference between such substances, which have been used for centuries and about which we know a lot, and the sort of artificial chemicals that the hon. Gentleman has described, which can devastate bodies because they are not natural?

Mr. Flynn: The hon. Lady is right. That is precisely what happened with the derivative of cannabis that has been used as a substitute in hospitals. There have been problems with that which have never occurred with cannabis in its natural state, which comprises 64 different elements.

Mr. John Austin-Walker: Will my hon. Friend also confirm that cannabis is non-addictive, unlike tobacco, alcohol and some of the other drugs mentioned?

Mr. Flynn: Indeed. It is clear from a wealth of medical evidence that cannabis is not an addictive drug.
I must mention some other cases. I find myself greatly moved by the personal circumstances of many people who have nursed relatives who are terminally ill and the beautiful stories of how radiance came back into their


faces after taking cannabis—a radiance absent when they were on conventional drugs. I see also the pain on other faces—of people who bravely say that they are taking cannabis or giving it to relatives. The law says that those people should be thrown into gaol or fined £2,500 and criminalised. There can be no sense in continuing with such nonsense in respect of a mild, benign drug. But that is the law.
One case involved a man who was looking after his 48-year-old wife who was in the prime years of life. He was visited by Customs and Excise, although the matter was not pursued as far as a charge. Another case involved a doctor who prescribed cannabis for her seriously ill daughter. That case went to court. The law is unenforceable. There is not a judge or jury in the country who would dare act against someone behaving in a humanitarian way to their loved ones. The law is stupid and no one can defend it.
The Minister cannot hide behind the nonsense of saying that we need more research, which is his defence. We need more research into every possible aspect of medicinal drugs. There is no drug like cannabis which has had such a trial over the centuries. As we heard from the hon. Member for Billericay (Mrs. Gorman) said, who has a background in chemistry, in its natural form it is acceptable and safe.
We know that there are problems. Cannabis should not be given to people suffering from schizophrenia or those who are engaged in driving or other activities which might be affected by the psychoactive parts of the drug. Such circumstances must be taken into account by anyone prescribing it. However, there is overwhelming evidence from thousands of patients that for glaucoma, multiple sclerosis, cerebral palsy, spasm and muscular illnesses cannabis is the only drug that can be used.
The case of chemotherapy has recently come up. Many people taking that terrible treatment suffer from continuous nausea. Conventional medicines do not work, but cannabis has been found to be effective in many cases. Who dares to deny those people that medicine? Many hon. Members in this House would never dream of breaking the law on anything, but any of us would recommend it if our relatives were suffering such nausea and there was no alternative. What do people do now to get the drug? They can only get it on the street or grow it themselves. One brave lady from Cardiff, who is not 100 yards away from me—

Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order. The hon. Gentleman must not refer to people in the Gallery.

Mr. Flynn: Clearly, there is no one here but the lady might be listening to me on the radio. I shall not refer to her again. However, the lady in question bought a cannabis plant. She does not have the dexterity to roll her cannabis cigarettes herself but keeps them in a lovely silver cigarette case that she has placed near a bust of Queen Victoria because Queen Victoria took cannabis every month of her adult life and lived to a great age, thus demonstrating the drug's lack of ill effects. Many other people took the drug at that time.
The Government cannot continue to hide behind the claim that additional research is needed. Research could continue for many years and might produce a result only

in five, 10, or 20 years. The argument needs to be resolved now. The Minister is known to be a humane and compassionate man who is respected by every hon. Member. He has the possibility to do something that all politicians would love to do—he can relieve the pain of hundreds of thousands of people, stop many people being criminals and take a major step towards the provision of respite.
Many patients cannot be treated for their terrible illnesses with the proper medicines that doctors would like to use. That charade must be stopped. On behalf of the many law-abiding people who are nevertheless breaking the law, those who are denied the best treatment, those who are in pain but cannot get relief, and those who see others in terrible pain, I appeal to the Minister to announce a minor change in the law and a return to what it was in 1971.

Mr. Tony Banks: I am grateful to my hon. Friend the Member for Newport, West (Mr. Flynn) for his eloquent summary of the arguments. I endorse the sentiments that he expressed. The Minister is known to be a compassionate man: indeed, I regard him as the acceptable face of Conservative extremism. Is there any conflict between the Department of Health and the Home Office? Is it not a fact that the real problem lies with the Home Office rather than with the Minister's Department?
This morning I took part in a phone-in on the BBC. The hon. Member for Dover (Mr. Shaw) and I were asked how we would tell a person suffering from multiple sclerosis and who was in a wheelchair and in great pain that cannabis was to be denied to them because it was illegal for a doctor to prescribe it. I invite the Minister to contemplate that question when he replies. I am sure that in his heart he is persuaded by our arguments. We should all be grateful to hear him say so from the Dispatch Box.

The Parliamentary Under-Secretary of State for Health (Mr. John Bowis): I am grateful to the hon. Member for Newport, West (Mr. Flynn) for raising the issue and to hon. Members of both parties for chipping in. I am also grateful for the kind comments which I imagine have something to do with those moments of high joy and ecstasy that the human brain can experience and to which reference has been made.
This is a serious matter which affects many people. There is a great deal of pain, but there is also a great deal of hope that cannabis may become available as a prescribed drug. I understand that, but, in the short time available, I must set out the Government's position. I shall not dwell on the recreational misuse of cannabis. On the basis of what the hon. Member for Newport, West said, I think that he and I agree about that. I shall deal with the therapeutic use of cannabis.
We have received a number of representations claiming that cannabis is effective in treating some of the symptoms of multiple sclerosis and other conditions, some of which the hon. Gentleman mentioned. In October, I met the hon. Member for Great Grimsby (Mr. Mitchell), Lord Whaddon and representatives of the Alliance for Cannabis Therapeutics to hear the case that cannabis should be made available for medicinal use. I


agreed then to give careful consideration to the points put to me. Since then, the hon. Gentleman has written to me and acknowledged that it is not something to be rushed, although we need to move as fast as is sensible.
The therapeutic use of cannabis is a complex issue. It may be helpful if I deal more fully with some of the important considerations related to it. Under section 7 of the Misuse of Drugs Act 1971, cannabis and certain other controlled drugs, such as raw opium and coca leaf, have been designated as drugs which it is in the public interest for their production, supply and possession to be either wholly unlawful or unlawful except for the purpose of research or other special purposes, or for it to be unlawful for doctors to prescribe or supply except under licence from the Home Secretary. The controls imposed by the Act conform with the international restrictions covering those drugs.
It has of course been claimed—and it may be so—that specific medical conditions could be improved by the use of cannabis, but everyone agrees that we need to consider such a claim carefully before deciding to allow the use of cannabis as a prescribed drug. As for any other unlicensed product, the supporting data would need to be presented to the Medicines Control Agency, which in the usual way would evaluate any application made to it by a sponsor seeking a product licence. I understand, that if a product licence were issued by the MCA, the 1971 Act controls could be modified to make such a medicine available to patients. Any change in the controls would not, of course, extend to non-medical use.
I have heard it said that cannabis was available for many centuries, and certainly for medicinal use prior to 1973, so its legal use could simply be reinstated. That is not possible. The decision to stop the medicinal use of cannabis was based on the evidence available at the time, which was that cannabis was no more effective than other available drugs and followed on from the advice of the World Health Organisation at the time. Since 1973, all drugs currently on prescription have undergone a stringent review of their safety, efficacy and quality, and it would be wrong simply to reinstate cannabis without such a review being undertaken. A company seeking a product licence would therefore have to present evidence of the drug's safety, efficacy and quality to the MCA in the usual way.
There are side effects from the use of cannabis. There is convincing evidence that for some people cannabis gives rise to acute and transient mental disturbance and may be implicated in drug-induced serious mental—or psychotic—illness. For regular long-term users, there is some research evidence of damage to the testes, liver and lungs. It is not a matter of dispute that in the short term cannabis can make users light-headed and unable to concentrate, which can affect their ability to drive a vehicle, operate machinery or make sound decisions affecting work, leisure or daily living. The more potent version of cannabis—skunk cannabis—has a higher level of tetrahydro-cannabinol. Because THC is fat-soluble, it tends to accumulate and can damage organs.
Most drugs have side effects, and a relevant consideration—

Mr. Flynn: rose—

Mr. Bowis: I must press on in an attempt to deal with the points that have been made.
A relevant consideration is whether the benefits of the drug are sufficient to outweigh the risks, which is why companies seeking to market drugs have to provide evidence of their safety, efficacy and quality.
The form in which cannabis would need to be available for use as a medicinal product in a controlled dose is another consideration. As the hon. Member for Newport, West said, nobody wants to see reefers being prescribed. The matter of form is also in the first instance for a company seeking to market such a product.
The representations that I have received include a wealth of anecdotal evidence of the efficacy of cannabis in treating some of the symptoms of multiple sclerosis and other conditions. In matters as important as those affecting people's health, however, scientific research-based evidence is what we need. Although the hon. Gentleman predicted that I would say that we needed more research, such a statement has to be right. As yet, conclusions of available research are not very convincing owing to the limited scope of the projects, the use of small cohort groups or the lack of suitable scientific methodology.
It may be that further research is needed, and I understand that the Multiple Sclerosis Society of Great Britain and Northern Ireland is taking positive steps to encourage trials by offering support to researchers. The main agency through which the Government sponsor medical research—the Medical Research Council—is always willing to consider scientifically sound proposals.
It may be helpful if I also remind the hon. Gentleman that current legislation does not prevent research into the medicinal use of cannabis, provided that a Home Office licence has been obtained for that purpose. I can tell the hon. Gentleman that there is no difference between the Home Office and the Department of Health on this matter. For the purposes of a clinical trial which involves the sale or supply of medicinal products and various other specified activities, a clinical trial certificate or a clinical trial certificate exemption would also have to be obtained from the Medicines Control Agency.
We are aware of the distress experienced by people suffering from multiple sclerosis and other conditions and we have been carefully considering the representations that have been made. I remind the hon. Gentleman, however, that we are committed to ensuring that patients receive the drugs that they need to treat their clinical conditions. If a medicine is brought forward and approved by the MCA, the controls under the Misuse of Drugs Act—for which the Home Office is responsible—could be modified to make such a medicine available to patients. If the regulations were amended, the decision to prescribe a particular drug would depend on the clinical judgment of the doctor concerned. The trouble is that we have not yet reached either of those two stages, but I assure the hon. Gentleman that we shall watch developments carefully and fairly.

It being half-past Two o'clock, the Motion for the Adjournment of the House lapsed, pursuant to Order [19 December].

Oral Answers to Questions — TRADE AND INDUSTRY

Unsafe Products

Mr. McAllion: To ask the President of the Board of Trade what further representations he has had from the organisations representing consumers about improving recall procedures for unsafe products. [32115]

The Parliamentary Under-Secretary of State for Corporate and Consumer Affairs (Mr. Jonathan Evans): I have received no recent representations on this matter, but the Government have in place powers which allow enforcement authorities to remove unsafe consumer products from the market. Those powers are complemented by powers to require public warning notices if necessary.
Obligations to comply with consumer safety legislation, as well as the adverse impact of product liability claims, also provide business with clear incentives to act quickly when issues of safety may arise, including undertaking recalls when appropriate.

Mr. McAllion: Is the Minister aware that as many as 3,700 Citroen ZXs are being driven with potentially lethal footbrakes due to a manufacturing fault? Will he speak to Vauxhall about the 330,000 cars on the road with wrongly fitted airbag sensors, or to Renault about the 1,000 Espaces which can burst into flames at any moment?
Consumer groups are telling us that the recall procedures are shambolic and ineffective. What is the Minister going to do about that? Is it not time that he put the interests of consumers before, not after, the interests of the big companies that dominate our car industry?

Mr. Evans: For goods in the business supply chain, there are already in place quite stern measures of enforcement of the sort the hon. Gentleman desires. The point that he is making goes beyond the business supply chain to when the goods are in the hands of consumers. As I indicated in my main answer, when any difficulty arises in relation to product safety, there is a very clear incentive for manufacturers to deal with such matters by means of proper recall procedures.
The hon. Gentleman might be aware that the Department has been involved with the British Retail Consortium, the Association of Manufacturers of Domestic Electrical Appliances and the Consumers Association in creating very clear guidance to cover the sort of points to which he referred.

Privatised Utilities (Directors' Pay)

Mr. Jon Owen Jones: To ask the President of the Board of Trade if his Department intends to compile information on directors' pay and share options in the privatised utilities, with particular reference to the regional electricity companies. [32117]

Mr. Pike: To ask the President of the Board of Trade what representations he has received about the need for measures relating to excessive pay and share option increases by the executives of privatised utilities. [32126]

Ms Eagle: To ask the President of the Board of Trade what plans his Department has to compile information on directors' pay and share options in the privatised utilities. [32127]

The Minister for Industry and Energy (Mr. Tim Eggar): Remuneration in the private sector is a matter for the companies concerned and for their shareholders.

Mr. Jones: Will the Minister explain why the Government chose not to use their golden share to prevent the directors of the regional electricity companies paying themselves huge salaries and topping them up with gross share options, to the disgust of consumers and the general public alike?

Mr. Eggar: Under the terms of the golden share, it could not be used for that purpose. That was very clear when the companies were floated. The hon. Gentleman ought to do more research. He appears not to be aware that the right hon. Member for Sedgefield (Mr. Blair), who led for the Opposition on the Electricity Bill, never once, throughout the entire passage of that Bill, raised on the Floor of the House or in Committee the issue of share options. The hon. Gentleman ought to be asking his right hon. Friend the question.

Mr. Pike: If the Greenbury committee does not ultimately yield proposals which act in the best interests of consumers and the public, and stop the excesses, what will the Government do to protect the interests of the public and consumers?

Mr. Eggar: In terms of the monopoly utilities, which will, of course, shortly be exposed to the competitive market, consumers do not suffer from excessive payments to directors because, under the way in which the regulation works, any increase in pay comes off the return to shareholders. It is not added to the costs to consumers. The hon. Gentleman should understand that.

Ms Eagle: Is not the Minister being terribly complacent when he says that that huge issue of public concern is not a matter for the Government? Has not the Prime Minister himself said that he finds the increases distasteful? Is not the real problem the fact that the Government do not want to do anything about them, yet the public out there are disgusted by the huge, excessive increases that executives are paying themselves and want action? When will the Government take action?

Mr. Eggar: Nobody condones excessive pay increases or remuneration packages, but the hon. Lady fails to recognise the considerable contribution that the privatised utilities have made to reducing bills. For example, if the announcement that Professor Littlechild made last week is implemented, it will result in a £9 reduction in the average electricity bill for the average consumer. Moreover, there has been a 40 per cent. real decrease in industrial gas prices as a result of the introduction of competition. That is good for consumers, both domestic and industrial.

Mr. Congdon: Does my right hon. Friend agree that the concerns expressed by the Opposition about executive pay must be set against the real benefits that privatisation has brought to consumers? Is he aware that the customers of Seeboard have already benefited from a 20 per cent. reduction in the standing charge, and will benefit from a further 25 per cent. reduction later this year? Does that


not show that privatisation has worked to the benefit of consumers, who would not have benefited if we had listened to the siren voices of the Opposition?

Mr. Eggar: My hon. Friend is right. If the industries had still been nationalised, we should be seeing rising rather than falling prices, massive overmanning and inefficiency. My hon. Friend might be aware that, as a result of the recent announcements on electricity prices, the average electricity consumer may spend about £75 less on his electricity bill in the coming year than he did last year. That represents a considerable benefit to the individual consumer.

Mr. Salmond: Does the Minister have a personal view about the actions of Richard Giordano at the British Gas annual general meeting, where he exercised the block vote to defend the pay and perks of his fellow executive directors? Does not that sort of behaviour make nonsense of Government claims that it is up to shareholders to restrain excesses? What changes, if any, in company law does the Minister think could be introduced to make a reality of shareholder democracy?

Mr. Eggar: The hon. Gentleman and the rest of the Opposition do not seem to recognise that such issues are the responsibility of the private sector directors and the chairmen and boards of the companies. What Mr. Giordano has said is a matter for him. Of course the Government will take account of any recommendations by the Greenbury committee when we receive them, and if appropriate we shall not hesitate to legislate.

Mr. Bill Walker: Does my right hon. Friend agree that, at private sector annual general meetings, it is not only the final vote but the atmosphere in which the meeting is conducted that matters? If a meeting believes that members of the board have been given more than they are entitled to, perhaps people should reflect on the fact that for every pound that those individuals receive, 40p goes to the Chancellor of the Exchequer.

Mr. Eggar: Of course the taxpayer benefits from the contribution made by individuals who receive high wages. At the end of the day what matters to consumers is the fact that their bills come down in real terms. That has been achieved for both gas and electricity as a direct result of Government policies that the Opposition have consistently opposed.

Mr. Wilson: I congratulate the Minister on his effrontery, if on nothing else. I am sure that he is aware of the Library's independently researched finding that the price of electricity has increased since privatisation. If he wants to argue about that let him argue with the Library, but will he cease to restate the misleading information that he has repeated over and over again today?
Is he aware that, in the few days since an American company acquired a stake in South Western Electricity, the share options held by the four directors of the company have increased in value by £322,000? Is that what passes for enterprise in Tory Britain today? Are not share options in the privatised utilities a disreputable and discredited scam, organised by the beneficiaries in their own interests under licence from the Government? It seems as if the new President of the Board of Trade intends to do as much as the previous one to end the abuses—absolutely nothing.

Mr. Eggar: Not for the first time, the hon. Gentleman is wrong. There has been a real decrease in electricity

prices of 8 per cent. in the past two years, and we can look forward to further considerable decreases in electricity prices in real and perhaps nominal terms in the coming months.
With regard to the hon. Gentleman's other point, why do the Opposition constantly peddle the politics of envy? Why do they never take into account the positive benefits that flow directly to the consumers that have resulted from the policies followed by the Conservative party?

Small Businesses

Mr. Hendry: To ask the President of the Board of Trade what support is given by the Department to encourage small businesses; and if he will make a statement. [32118]

The Parliamentary Under-Secretary of State for Small Firms, Industry and Energy (Mr. Richard Page): The Government recognise the crucial role played by small firms by keeping inflation and interest rates low and by reducing legislative, administration and taxation burdens. They also provide direct assistance where appropriate. This includes finance, specialist advice and support in a variety of areas including innovation and technology, exporting and design.
The new business link network is revolutionising the delivery of business support services. From April 1996 it will be the normal delivery route for all DTI services.

Mr. Hendry: Does my hon. Friend agree that one of the most important ways in which the Department can help small firms is by helping them to finance their growth and development? Does he further agree that the loan guarantee scheme has played an important part in that process? As a number of firms cannot take advantage of the scheme, will my hon. Friend undertake to keep it under review, so that it may benefit as many firms as possible?

Mr. Page: I am grateful to my hon. Friend for his kind words about the loan guarantee scheme. As he has been so generous, I shall reveal that, along with my hon. Friends the Members for Surrey, North-West (Sir M. Grylls), for Hampshire, North-West (Sir D. Mitchell) and for Mid-Kent (Mr. Rowe), I was responsible for pushing for the introduction of such a scheme at the beginning of the 1980s. Applications for the scheme are at a record level, which is indicative of the confidence that is building throughout the UK economy. A review of the scheme is taking place so that we can focus our efforts to try to help British small businesses even more.

Mr. Harvey: The Minister will recall that, in the Budget two years ago, the Chancellor of the Exchequer announced that it was the Government's intention to bring forward measures to address the problem of the late payment of commercial debt. Given that the previous President of the Board of Trade—he has now gone to greater offices, both literally and metaphorically—always seemed to be implacably opposed to any such measures, can we anticipate that the Government will now bring forward measures to give effect to the promise made two years ago?

Mr. Page: If statutory instruments were the magic bullet to solve the problem of late payment, I would sign up along with everyone else. I am afraid that life is more


complex than that. Surveys have suggested that the majority of late payments are due to disputes about the terms of a contract and about whether goods have been supplied. Surveys by Grant Thornton have shown that payment periods in the United Kingdom are coming down, that we are improving against the rest of the European Union and that we are doing better than most countries which have a statutory right to late payment.
We are encouraging support for the Confederation of British Industry's code of conduct regarding practices of payment. As the Minister for Small Business—from, I believe, 11.30 this morning—I can say that the Department is working towards a British standard regarding prompt payment. I can also recommend the Department of Trade and Industry's free leaflet on making cash flow to help late payment.

Mr. Wilkinson: In his list of measures to encourage small business, my hon. Friend rightly included the reduction of taxation. Between now and the Budget, will his Department make representations to the Chancellor of the Exchequer suggesting that small incorporated companies be exempt from corporation tax below a certain threshold, just as individuals are below a certain threshold for income tax, as small businesses are usually under-capitalised and must expand on the basis of the profits that they can retain?

Mr. Page: I note what my hon. Friend says. He will understand if I do not give a direct answer, but I understand the reasoning behind his question. Since 1979, the Government have reduced corporation tax for smaller businesses from 42 per cent. to 25 per cent. in order to help small businesses.

British Coal Enterprise

Mr. Bayley: To ask the President of the Board of Trade how many new jobs have been created by British Coal Enterprise. [32119]

Mr. Page: British Coal Enterprise estimates that it has helped with the creation of 51,300 jobs through its business funding activity and 15,000 jobs through its workspace activities. Through its job and career change scheme, BCE has also provided help to some 57,000 ex-employees of British Coal seeking work. Of those, BCE estimates that some 50,000 found jobs, either directly or following a period of retraining.

Mr. Bayley: Many hon. Members from mining areas might dispute those figures. Nevertheless, British Coal Enterprise has invested considerable sums of money in former coalfield communities. If that is good for the coalfields, why is it not good for the railways? What plans do the Government have to set up a British Rail Enterprise to replace the tens of thousands of railway jobs that have been lost as a result of privatisation?

Mr. Page: I am the first to pay tribute to the work done by British Coal Enterprise in providing jobs for people in former mining communities. Providing jobs for ex-railway workers is a matter for the Secretary of State for Transport. I look the hon. Gentleman straight in the eye and say that I fully accept that difficulties have arisen in his constituency as a result of the unemployment caused by the closure of a railway manufacturing company. However, in his travel-to-work area,

unemployment is only 5.7 per cent., which is way below the national average. There should, therefore, be a good chance of people finding work in his constituency.

Crown Post Offices

Mr. Bill Michie: To ask the President of the Board of Trade if he will make a statement on the future of Crown post offices. [32120]

The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Ian Lang): The location and ownership of post office outlets is a matter for the board.

Mr. Michie: I am sure that the House and people outside are interested to know how much support the Government have from consumer organisations for the possibility of privatising and franchising Post Office Counters. People outside are saying that Crown post offices should be given freedom of access to funds so that they can once again create a service that is appreciated by the vast majority of the nation. Why are the Government prejudiced against a public enterprise that works and is appreciated?

Mr. Lang: I presume that the hon. Gentleman is aware that 95 per cent. of all post offices are already in the private sector. What we are talking about with regard to the Crown offices is not privatisation but providing better services in a more responsive way in the interests of the public. It is clear from the success that has been established with those offices that have been transferred to agency status that the services have improved and customer satisfaction has risen.

Mr. Gallie: First, may I commiserate with my right hon. Friend on giving up the great office of Secretary of State for Scotland? That shows great sacrifice in the interests of the Union, because I am sure that he will do remarkably well in his current national post. May I also remind him that, in recent times, there has been great concern about post offices in rural areas? May I point out that the lottery, gas companies that now offer a bill payment service through post offices, and a range of other matters linked to privatisation offer a great future for post offices in rural areas? Will my right hon. Friend bear that in mind when he deals with the matter in future?

Mr. Lang: I thank my hon. Friend for his opening remarks. As one of my colleagues said to me, I have moved from the position of viceroy to that of president. I can live with that happily, and I hope that my hon. Friend will support me as I seek to ensure that the rest of the United Kingdom achieves the lower unemployment that we have in Scotland, the higher productivity and the greater exports per head of the population that Scotland has already achieved.
On the post offices, my hon. Friend is absolutely right. They operate in a competitive market, and it is important that they react to the shifting pattern of retail trade. That is part of our objective.

Brent Spar

Mr. Tony Banks: To ask the President of the Board of Trade what are the most recent communications he has had concerning the disposal of Brent Spar. [32121]

Mr. Eggar: I have had meetings and communications as appropriate with Shell on that matter.

Mr. Banks: Is it true that the Government did not consult the Natural Environment Research Council regarding the disposal of Brent Spar, and that they took advice mainly from the Scottish Office?
As we now know that, according to the Government's own figures, 32 oil rigs will reach the end of their useful life during the remainder of the century and that 13 of them might end up being dumped at sea, can the Minister really assure the House that environmental considerations are uppermost in his mind and that dumping something at sea is more environmentally advantageous than bringing it ashore? The rigs were made onshore; surely they should be dismantled onshore.
Shell is worried only about its budgets, its income and its money. It is not at all concerned about the environment. It is about time that the Government shared the feeling of the great majority of people in the country that dumping at sea is unacceptable.

Mr. Eggar: There were, of course, three years of extensive studies carried out by Shell. The major document is now in the public domain, and has been since 16 February.
The Brent Spar is now moored in a Norwegian fjord. Shell is inviting an independent inspection entity, DNV, to inspect and analyse the allegations that have been made by Greenpeace and to report on them fully and independently.
As for the environmental damage that the hon. Gentleman claims will be done to the deep sea and the Atlantic, I shall quote Dr. Tony Rice, an independent scientist and probably the leading independent deep sea biologist in the country, who said that the most likely impact of deep sea disposal of Brent Spar was
the death of a number of worms on the sea bed".

Mr Banks: indicated dissent.

Mr. Eggar: It is no good the hon. Gentleman shaking his head. The leading independent deep sea biologist said that, and that it was equivalent to the number of worms that would die on the ground during construction of a quarter of a mile of motorway. In his career in the House, the hon. Gentleman has taken up many lost causes, but taking up the cause of the Atlantic deep sea worm seems beyond even him.

Mr. Dover: Can my right hon. Friend confirm two things—first, that whatever method of disposal is decided on will be less environmentally pleasant than the one that has been irresponsibly thrown away by Shell and, secondly, that the cost to the taxpayer will not be greater than it would otherwise have been?

Mr. Eggar: I can confirm that Shell has informed me that the additional amount—in excess of the cost of deep sea dumping—will not fall on the taxpayer but be absorbed by the company. That is as it should be.
Future methods of disposal will now be studied. Shell came to us with the best environmental practical option. I expect it, in any proposal that it makes to us in future, to reach the same high standards of proof on the best environmental way to proceed as it did in reaching the decision that deep sea dumping was the best way to proceed. I would not rule out the option of deep sea dumping for the Brent Spar in future.

Ms Roseanna Cunningham: In view of the fact that, of the 14 reports passed by Shell to the Department of Trade and Industry, only two actually referred to onshore disposal options and, of those two, only one was referred to by Shell in its own best practical environmental option, does the Minister accept that, instead of simply leaving the matter to Shell, what we need to allay public anxiety is a properly set up independent commission to consider onshore disposal options?

Mr. Eggar: I have already made it clear that Shell has agreed to commission a completely independent audit of the Brent Spar situation and I am sure that it will ensure that the results of that independent investigation are made public. I am also intending, subject to the necessary commercial confidentialities—[HON. MEMBERS: "Ah."] That is the way it has to be. I also intend to publish the studies that have been carried out by Shell. It is clear that more studies will have to be commissioned in future months, even years, and I shall do my best to ensure that they also are placed in the public domain. I think that that is what the House would want.
We have a common interest in ensuring that the Brent Spar is disposed of in the best manner possible from an environmental point of view. The hysteria that has flowed from the Greenpeace campaign is not the best basis for taking serious decisions.

Mr. Nigel Griffiths: Does the Minister accept that, when Shell in Germany failed to endorse the disposal of the Brent Spar in the Atlantic, it left a massive gap in the Minister's credibility? He was the only one who continued to champion the environmentally damaging option, and he is now commissioning reports that he should have received a long time ago.

Mr. Eggar: That is absolutely typical of the hon. Gentleman. First, he misrepresents the position of Shell (Germany) and, secondly, he clearly prefers the opinion of Shell (Germany) to that of Shell (UK).

Dr. Spink: Does my right hon. Friend agree that it is highly unlikely that Shell will produce a compulsive case in favour of dismantling the rig onshore on environmental or economic grounds? If, perchance, there is an acceptable case for disposing of the rig onshore—either vertically or horizontally—will my right hon. Friend ensure that the work is done in our country so that our people get the jobs?

Mr. Eggar: My hon. Friend is right: there are very difficult technical issues concerning the way in which a platform storage buoy, which is designed to be vertical, can be moved to a horizontal position and then towed inshore to shallow water for disposal. That is a major environmental issue on its own.
As to where any work would be carried out if onshore disposal proved acceptable, that is clearly a matter that Shell would have to put to the United Kingdom Government. Shell has made it clear that it will discuss any disposal option with the United Kingdom Government rather than any other Government, and we will examine the type of issues that my hon. Friend has raised.

Manufacturing Competitiveness

Mr. Caborn: To ask the President of the Board of Trade what measures have been taken to improve manufacturing competitiveness. [32123]

Mr. Lang: The Government's policies since 1979 have contributed to a transformation of the competitiveness of manufacturing industry. We have reformed the labour market and our education system, cut taxes and pursued a vigorous programme of privatisation and liberalisation. The results are clear. Since 1979, manufacturing productivity has grown faster in the UK than in any other major industrialised country—after two decades in which the UK was the slowest.

Mr. Caborn: I thank the President of the Board of Trade for that answer. I do not know whether I am addressing my question to the right person in view of the Government's reorganisation, particularly in the area of competition, but I expect that the President will resolve the matter when he responds to my question.
Has the President seen the 3is report, which was released last week, about investment in small and medium-sized businesses? It underlined the points made by the Select Committee on Trade and Industry in its report about the competitiveness of United Kingdom manufacturing and in its second report about investment in small and medium-sized businesses, which showed clearly that we are yet again falling behind Europe in terms of investment. The 3is report confirms much of that serious evidence.
Does the President of the Board of Trade agree that he should put pressure on the Treasury to provide some fiscal incentives in the next Budget to ensure that there is medium to long-term investment in small and medium-sized businesses rather than to opt for the short-termism that seems to be inherent in the United Kingdom?

Mr. Lang: I certainly accept the hon. Gentleman's point that investment is important in all businesses, large and small. It is important for the Government to encourage a stable economic environment with low inflation in which businesses can undertake such investment. I am encouraged by the fact that investment in manufacturing industry has risen by 8.3 per cent. in the past year. That is a substantial rise, which I am keen to encourage further.

Mr. Anthony Coombs: Will my right hon. Friend confirm that one reason why competitiveness in manufacturing industry has risen is the 8.3 per cent. increase in investment in the past year, following a 6.75 per cent. increase in the previous year? Does he agree that one of the fiscal incentives that manufacturing industry would like and that was mentioned a moment ago is a reform of the capital gains tax regime to encourage longer-term rather than shorter-term investment?

Mr. Lang: I hear what my hon. Friend says and I have no doubt that my right hon. and learned Friend the Chancellor of the Exchequer will consider such points, along with all the other issues that he will consider before his Budget. My hon. Friend, and indeed the whole House, will agree that one of the most important ways in which large and small businesses can remain competitive is to keep down non-wage labour costs and resist the minimum wage and the social chapter.

Mr. Miller: On the evening of 6 July, I placed on the board a letter to the President of the Board of Trade and faxed his office asking important questions about competitiveness in respect of the reorganisation of science in his Department. First, will the President of the Board

of Trade assure the House that in future we will receive information directly and that the press will not get it the previous day? Secondly, will he give the House an assurance that research councils that are not in the near market area will not be treated as second division organisations within his new arrangements?

Mr. Lang: I am happy to reassure the hon. Gentleman that I have taken careful note of the points that he raised in his letter. I replied to his letter today, as soon as I had announced the disposition of portfolios within the Department. My hon. Friend the Member for Esher (Mr. Taylor) is taking on the role as Minister for Science and Technology. I hope that between us we will reassure the hon. Gentleman of the importance that we attach to science and technology—alongside the other activities of the Department of Trade and Industry—in its own right and as a way of improving the competitiveness to which we are all committed.

Sir Michael Grylls: Does my right hon. Friend accept that he will have the enthusiastic support of all British industry if he continues to resist vigorously—as the Government have done until now—unnecessary social charges from the continent of Europe that have done so much to ensure that Europe created fewer jobs than either Britain or the United States in the past 20 years? That is crucial to competitiveness.

Mr. Lang: I absolutely agree with my hon. Friend. It is significant that in the past year employment in manufacturing industry in the United Kingdom has risen by no fewer than 31,000 jobs. In the past two and a half years, unemployment across the economy as a whole has fallen by well over 600,000. That is in sharp contrast to many countries in the rest of Europe that are burdened with excessive social costs.

Mr. Skinner: Can the Minister tell us why the Government do not seem to practice a great deal of competition within the Department of Trade and Industry when it comes to handing out contracts, for example, for the refurbishment of No. 1 Victoria street? Can he tell us more about the internal inquiry that is taking place? I assume that he has been informed about the letter that I set him quite recently referring to the fact that top officials at the DTI were gallivanting around the world and being handed big raffle prizes, although they had not entered a raffle, and then some very uncompetitive tenders and bids were handed out to the favoured few. Is it not time that the scandal was sorted out?

Mr. Lang: I can reassure the hon. Gentleman that the new headquarters of the Department at Victoria street were built under the private finance initiative. As for his letter, my hon. Friend the Minister for Science and Technology has sent the hon. Gentleman a full and detailed reply today.

Competitiveness

Mr. Jenkin: To ask the President of the Board of Trade what responses he has received to his Department's second White Paper on competitiveness; and if he will make a statement. [32124]

Mr. Lang: The White Paper "Competitiveness: Forging Ahead" has been widely welcomed by industry, including major representative bodies, such as the CBI,


the Engineering Employers Federation and the Chemical Industries Association, as well as many of our major companies.

Mr. Jenkin: Returning to a theme raised earlier, does my right hon. Friend agree that a suitable tax regime is vital to competitiveness and that Britain currently has the most punitive capital gains tax regime among the Organisation for Economic Co-operation and Development southern countries? Is it not welcome therefore that noises emerging from parts of the Government suggest that that regime is under review? Will he use his good offices as President of the Board of Trade to push for a sensible reform to reduce the burden of capital gains tax?

Mr. Lang: I shall certainly ensure that my right hon. and learned Friend the Chancellor of the Exchequer is aware of my hon. Friend's concerns on that. My hon. Friend will, of course, agree that the reduction in corporation tax for both large and small companies has been one of the driving forces behind the successful growth and expansion of the economy in recent years.

Mr. Purchase: Given that the driving force for competitiveness is investment and the fact that investment in this country is at the same level as it was in 1989, does the President of the Board of Trade not recognise that to match the investment performance of Germany this country needs to invest another £42 billion per annum in order that we might become internationally competitive? What plans does he have to tackle that problem?

Mr. Lang: Perhaps the hon. Gentleman did not hear my answer to an earlier question, when I pointed out that investment in manufacturing industry was up by 8.3 per cent. on a year ago. As for his comparison with earlier years, I can tell him that, since 1981, total manufacturing investment has risen by 18 per cent. What guides investment is confidence in the management of the economy. Confidence is there now that was lamentably absent when the Labour party was in power.

Mr. Pickles: Does my right hon. Friend agree that the White Paper builds on many of the changes in the competitive nature of the British economy, one of which has been the creation of a flexible work force? Does he also agree that that can be seen writ large in the Ford Motor Company, which, this month, sees the production of the new Fiesta and which two months ago announced the new diesel plant at Dagenham? Does he further agree that Dagenham, which was once the symbol of all that was wrong with the British economy, is now the symbol of all that is right with the British economy?

Mr. Lang: Yes, I do. My hon. Friend makes the point very well. The Ford Motor Company is going from success to success. It is good to see the United Kingdom sharing so fully in that.

Mr. Bell: May I on behalf of Opposition Front-Bench Members congratulate the right hon. Gentleman on his elevation to President of the Board of Trade? We shall miss the lion's roar from the Conservative Benches, but no doubt the steady purring will continue into the ear of the Prime Minister.
Is it not remarkable that we are dealing with a competitiveness White Paper and the consultation documents on the day when it has been announced, by

official figures, that we have the lowest growth rate since late 1993; that our construction orders are at the lowest level since late 1992; that our housing figures, the orders in housing, are down 13 per cent. from what they were a year ago; and that private industrial development is also down? Is not it a fact that the only thing over which the previous President of the Board of Trade presided was insecurity in our industry, the length and breadth of the land? Is not that what the right hon. Gentleman should be addressing?

Mr. Lang: I am grateful to the hon. Gentleman for his welcome, which I much appreciate. Sadly, I thereafter have to disagree with everything that he said. He has been extremely selective with his figures. He might like to know that, overall, GDP, which has been rising for the past three years, rose by 4 per cent. in 1994. I recall that, when the previous Labour Government were in power, they could not achieve growth on average of more than 1 per cent. per annum.

Arms Sales (Licences)

Mr. Fisher: To ask the President of the Board of Trade what steps he has taken to improve the scrutiny of applications for licences for the export of armaments. [32129]

The Parliamentary Under-Secretary of State for Trade and Technology (Mr. Ian Taylor): Procedures and practices are under constant review to respond to changing circumstances. Since the late 1980s, there have been a number of important specific changes. These include: a higher staff/licence application ratio; more resources concentrated on sensitive cases; greater involvement of senior management; and wider co-ordination through use of information technology.

Mr. Fisher: Did not the former President of the Board of Trade, in his statement to the House on BMARC, admit that 74 per cent. of export licence applications were not even checked by his Department? Was that caused by sheer inefficiency or was there a more political reason— that the Government wished to turn a blind eye to the export of arms? What are the Government going to do to avoid further shambles like BMARC in the future, which have brought such discredit not only to the Government but to the country?

Mr. Taylor: The hon. Gentleman should know that the previous President announced that on a sample basis 74 per cent. did not have full supporting documentation. I have to inform the hon. Gentleman that every application form states whom the applicant wishes to be the end user and ultimate consignee. Therefore, the Department of Trade and Industry was informed by every applicant of where the applicant said that it was eventually sending the goods.
Supporting documentation is not legally required in all cases. However, since the inquiries that were conducted by the Select Committee on Trade and Industry and as a result of the Scott inquiry, the performance of the export licensing department has been significantly tightened. The requirement now is for all applications to have supporting documents and, because of the new computer technology, it is not possible to process a licence unless certain key questions are asked and answered.

Mr. John Marshall: Can my hon. Friend confirm that British Aerospace is a major exporter, that the attack on


defence exports could cost many tens of thousands of jobs in British industry, and that the Opposition do not care about manufacturing industry or the jobs in it?

Mr. Taylor: I agree with my hon. Friend. British Aerospace is a fine company, doing an enormous amount for the benefit of the British economy, a considerable amount for employment and, I stress, as Under-Secretary of State for Trade and Technology, an enormous amount for Britain's technological base. It is shameful for Opposition Members to condemn the excellence that is available in that British company.

Mr. Wilson: At the time that the Scott inquiry was set up, the Government had been in possession for some two years of all the BMARC papers which were taken during the raid on the Astra headquarters. If those papers had been made available, the Scott inquiry would not have been just about arms for Iraq and Matrix Churchill but about arms for Iran and BMARC. Why were the papers not made available?

Mr. Taylor: The papers to which the hon. Gentleman refers were obtained as a result of investigations into the company's financial status and have been retained for that purpose by the receiver. They have now been made available to Customs and Excise, and we are delighted that, at our invitation, the Select Committee on Trade and Industry is looking into all those matters. There is no necessary connection in the Scott report between Iran and Iraq. The Select Committee's work will be of great illumination to the House in what the President admitted in his statement to the House was a chapter of incidents which we would have preferred not to have happened but which were in no way a connivance, rather the result of administrative inefficiencies.

Mr. Hawkins: In the light of my hon. Friend's welcome statements about the contribution of British Aerospace, does he agree that the attacks on the defence industry from so many Opposition Members will be widely reviled by the thousands of my constituents whose families' livelihoods depend on their employment with companies such as British Aerospace, and they will not forget the attacks that have been made on their futures by Opposition Front-Bench Members?

Mr. Taylor: I agree with my hon. Friend, who has a considerable constituency interest in the defence sector. If Opposition Members were as assiduous as he is in defending the interests of their constituents, there would be fewer arguments against defence exporters and manufacturers. Britain's defence exports are worth more than £2 billion a year and, as I said earlier, they provide enormous prospects for jobs and Britain's technological base. We should be proud of that record. Nevertheless, we take care to which countries we export, and that is the effect of the answer that I gave a moment ago that we have tightened up significantly on the export control department's activities.

Rural Textile Manufacturing

Mr. Kirkwood: To ask the President of the Board of Trade what further plans he has to provide assistance to textile manufacturing communities in rural areas; and
if he will make a statement. [32130]

Mr. Eggar: Both my Department and the Scottish

Office are working with the textiles industry to offer practical support and advice from which such rural communities can benefit.

Mr. Kirkwood: Does the Minister accept that there have been some damaging job losses in the textile sector in my constituency recently? Is he aware that the textile sector represents nearly 88 per cent. of the manufacturing work force in the Hawick travel-to-work area? Will he give a commitment that his Department will do all that it can to develop the RETEX scheme for diversification, organised by the European Union to assist the process of diversification? Will he also see what he can do to obtain new export opportunities, particularly for small firms in the region, so that they can replace the jobs that have recently been lost?

Mr. Eggar: I am aware of the importance of textiles to the hon. Gentleman's constituency, and I understand his concern about the recent job losses at Pringle of Scotland.
We are currently taking a number of steps. As the hon. Gentleman knows, RETEX II should start disbursing money in September—£25 million over three years for the United Kingdom as a whole. We want to ensure that that money is spent effectively. I also recognise the need to expand market opportunities for textile manufacturers. The starting point should be an improvement in the relationship between United Kingdom retailers and manufacturers, which should become a "win-win" relationship. My Department has joined the Trade Association in an attempt to bring that about. It recently appointed Mr. Ken Watson—whom I met yesterday—to start an initiative designed to improve the relationship, and we hope that that will lead to many new orders.

Mr. Devlin: Is my hon. Friend aware that companies such as Pringle, and other woollen manufacturers in Scotland and the north of England, import about 90 per cent. of their mohair and cashmere from abroad? The finest cashmere-producing goat in Europe was developed in Scotland, but currently kids are being exported to Spain and Italy, where they receive agricultural support, because no such support is available in England. Why does my hon. Friend not look into that, along with our hon. Friend at the Ministry of Agriculture, Fisheries and Food?

Mr. Eggar: I must confess that I was not aware of the position. I shall make it my duty to become aware of it, and undertake to discuss this important matter with my hon. Friend.

Regional Selective Assistance

Mr. Coe: To ask the President of the Board of Trade if he will make a statement on the processing time of applications for regional selective assistance. [32134]

Mr. Page: Processing times vary according to the level of assistance requested. The existing targets are currently under review, and revised target times will be announced in our response to the Trade and Industry Select Committee report on regional policy.

Mr. Coe: I am grateful to my hon. Friend for his reply. He will know of the long delays that have left many south-western companies, including Cornish companies, in a frustrating no-man's-land. I welcome regional selective assistance, which has changed the industrial landscape in my constituency: it has created some 500 jobs since April,


when offers were made. I urge my hon. Friend, however, to look closely at the time taken to process applications in Cornwall and elsewhere in the south-west.

Mr. Page: My hon. Friend has been an enthusiastic chaser of RSA applications into my office. Along with those 500 jobs, there have been 19 applications relating to his constituency since last year. I accept, however, that the position is rather like the curate's egg—good in parts and bad in parts. The average processing time is about 40 working days, but many applications have been delayed, in some cases because of the slow return of information by applicants. A review is taking place. I know that my hon. Friend would not expect me to make any announcement before responding to the Select Committee, but I expect one to be made very shortly.

Mr. Gunnell: As the Minister knows, we are normally in competition for inward investment with our European partners. Is he satisfied that our processing is at least as efficient as that of any other European country, that some of the criticism about our not always conforming to the "level playing field" arrangements are unjustified and that all our European partners are operating such arrangements?

Mr. Page: The hon. Gentleman is jumping from one part to another. The Invest in Britain Bureau has been enormously successful. Last year, we had some 434 investment programmes, which will produce some 100,000 jobs in this country. On regional selective assistance applications, the review is taking place, and, again, it would be wrong for me to bring forward those details, but I can tell the hon. Gentleman that, last year, we made about 1,065 offers, with a value of £158 million, and we hope to create some 25,000 jobs, so one can see that the RSA process is doing a good job for UK Ltd.

Exports (East Midlands)

Mr. Tredinnick: To ask the President of the Board of Trade if he will make a statement on export figures in the east midlands for the past five years. [32135]

The Minister for Trade (Mr. Anthony Nelson): Separate regional figures are not provided but nationally, in the past five years, exports have risen by 33 per cent. to £134 billion, with east midlands companies making a full contribution to that growth.

Mr. Tredinnick: I warmly congratulate my hon. Friend on his new appointment and wish him well in the future. Does he agree that an important contribution to that export growth comes from firms, in Hinckley in my constituency and round about, such as Profilex, Nelson Burgess and Triumph Motorcycles, which is the country's second largest motor cycle company? Is it not remarkable that the May Confederation of British Industry survey found that the east midlands was leading Britain's export growth?

Mr. Nelson: First, I thank my hon. Friend for his kind sentiments. It is nice to be released from the Treasury and I am looking forward to my new freedom as Minister for Trade. Secondly, I join him in welcoming the fact that the east midlands is in the vanguard of this country's exports growth. That is a tremendous performance for that region and his constituency; a performance that I am sure will be sustained under Conservative policies of free trade and free enterprise, unlike Labour policies of intervention and minimum wages.

Industrial Competitiveness

Mr. Gapes: To ask the President of the Board of Trade what plans he has to improve the international competitiveness of British industry. [32136]

Mr. Lang: The wide range of measures that the Government are taking to promote the competitiveness of UK industry at home and abroad is set out in the recent White Paper, "Competitiveness: Forging Ahead", which has been so well received by industry.

Mr. Gapes: Given the international weakness of the pound and of the British economy, and the fact that this country's growth is the lowest in the G7 and the second lowest in the Organisation for Economic Co-operation and Development, does the President of the Board of Trade agree that, if we were to stay out of a single European currency, massive speculation would take place against the pound, necessitating an increase in interest rates?

Mr. Lang: I wonder whether all the hon. Gentleman's colleagues and hon. Friends agree with him in that sentiment, but I wish he and his hon. Friends on the Opposition Benches would desist from talking down the British economy, which is one of the best performing economies in the industrialised world. Since his party left office in 1979, exports have risen by over 90 per cent. thanks in large measure to the remarkable efforts of the former Minister for Trade, my right hon. Friend the Member for Wiltshire, North (Mr. Needham). On inward investment and mobile projects, this country has attracted more manufacturing projects than Germany and France combined.

Mr. Batiste: Given the importance of science and technology to industrial competitiveness, and the new functions of my right hon. Friend's Department, can he confirm that the functions of the Office of Science and Technology will be ring-fenced within his Department and that it will continue its strategic overview of Government research and development conducted across the board?

Mr. Lang: I can certainly reassure my hon. Friend that, by placing responsibility for these matters entirely with my hon. Friend the Member for Esher (Mr. Taylor), who will be the Minister with responsibility for science and technology, I am clearly signalling the specific and separate importance that I attach to science in its own right and as an adjunct to the Department of Trade and Industry, where so much benefit can be derived for industry. My hon. Friend the Member for Elmet (Mr. Batiste) will be reassured when we are able to let him have more details on the future of the Office of Science and Technology, the technology foresight programme and other projects with which the Government are associated. I think that he will find that his answer is satisfactory.

Privatised Utilities (Regulation)

Mr. Burden: To ask the President of the Board of Trade what plans he has to change the mechanisms for regulating privatised public utilities. [32137]

Mr. Eggar: The mechanisms for regulating the privatised utilities have evolved over time, in response to the practical experience of the various directors general. Independent regulation has delivered real benefits to consumers and to wider market development.

Mr. Burden: Does not the Minister recognise the frustration among the British people who regularly see


more and more excesses in the privatised utilities? Today's news about the water industry and share options is just the latest example, but the Government say that they have nothing at all to do with them. When they were forced to listen, they set up the Greenbury committee which offers no guarantee that anything will be done. When will the Government accept that they have a responsibility to enforce decent standards in this area, and when will they establish a regulatory mechanism that puts the consumer first and does not fudge matters in the way that the Government have done?

Mr. Eggar: I am not sure whether the hon. Gentleman was in the House earlier when we discussed this issue. He should ask his right hon. Friend the Member for Sedgefield (Mr. Blair), who led for the Opposition against electricity privatisation, why he did not raise or identify the whole issue of share options at that time. The hon. Gentleman should ask his right hon. Friend why he failed to pick that up. The overall benefits of privatisation are there for all to see—reduced prices for consumers in real terms. Electricity prices are significantly down. They are sharply down for gas and there will be significant additional price reductions for electricity over the coming months.

Mr. Jacques Arnold: My right hon. Friend will be well aware of the considerable success of the public utilities in obtaining international contracts for Britain. For instance, the water industry has obtained £2,000 million-worth of contracts for Britain in the past year alone. How does it help our public utilities to gain such business for Britain if Opposition Members are forever slinging mud at them?

Mr. Eggar: I very much agree with my hon. Friend. British Gas is competing and winning around the world, and a number of our water utilities are doing exactly the same. Our electricity utilities, particularly the generating companies, are investing effectively, and that will bring dividends to the United Kingdom and provide significant employment in supplying companies in the UK and to individuals who are directly employed. That is a good result for Britain, and the Opposition should not drag Britain down in their approach to this important issue.

Mr. O'Neill: Is the Minister aware that there is widespread concern about the quality of treatment received by the regional electricity companies at the hands of the regulator? Is he aware of the frustration at the lack of transparency and accountability shown by Professor Littlechild and his staff? Will he take steps to ensure a more businesslike and more commercially aware approach to regulation by Offer? Does he not realise that the companies and the consumers require a more balanced approach? At present, the regulator has neither sympathy for the consumers nor understanding of the commercial realities of the business in which he operates. Surely he can get the balance right and try to satisfy them. If he cannot, will the Minister take steps to remove him?

Mr. Eggar: I am surprised at the hon. Gentleman. I thought that he had accepted the case for independent regulators. It does nothing for the independence of regulation and the effective operation of the industry for

regulators to be under partisan political attack on a personal basis. That does the hon. Gentleman no credit at all.

Mr. Mans: Does my right hon. Friend agree that, when these recently privatised utilities were in the public sector, there was no one acting on behalf of the consumer because there were no regulators? On top of that, those utilities were highly inefficient and were able to invest in their infrastructure only when the Treasury let them do that. Does he further agree that the position is not only better in terms of the money that the public sector has to provide, but better for consumers, who get better value for money?

Mr. Eggar: I completely agree with my hon. Friend, and there is a further point. There is a great deal of transparency in the way in which the regulatory system works. The issues are put on the table for everybody to consider but they were never available for consideration in that way when those industries were nationalised and decisions were taken bilaterally in ministerial offices. The last thing that Labour took account of when it was in government was the interests of consumers. It took account the whole time of its political interests and the interests of the then Labour-run Treasury.

Arms Sales

Mr. Mullin: To ask the President of the Board of Trade what proportion of British manufacturing exports was accounted for by arms or arms related material (a) in 1979 and (b) in 1994; and if he will make a statement. [32138]

Mr. Ian Taylor: In 1979 the value of exports of identified defence equipment accounted for 1.3 per cent. of exports of manufactured goods from the United Kingdom. In 1993 the proportion was 2 per cent. Figures for 1994 will be published by the Ministry of Defence later this month.

Mr. Mullin: Considering that the Minister is a member of a regime which over the past 17 years has presided over the destruction of about a third of our manufacturing industry, does he consider it a disappointment that the one area in which we appear to excel is the manufacture and marketing of arms? Does he think that we should find a more honourable way of making a living? Does his Department have any plans to encourage arms manufacturers to diversify into more productive activity?

Mr. Taylor: I am not sure whether the hon. Gentleman intended to pay us a compliment by calling us a regime, but judging by his other standards, he was not attempting to be friendly. As for the British manufacturing base, the efficiency and technical application of United Kingdom manufacturing has dramatically improved since 1979 and the defence industry has had a major positive influence on new management techniques and technological application. There is nothing to be questioned about whether this country should be selling manufactured goods. We have only 16 per cent. of the world market. I would like more, but our share shows that many other leading countries are also involved in arms sales. The key question is to whom we should be selling, not whether we should be selling.

Bosnia

The Secretary of State for Foreign and Commonwealth Affairs (Mr. Malcolm Rifkind): With permission, Madam Speaker, I should like to make a statement to the House on events in Srebrenica.
Srebrenica was established as a safe area by United Nations Security Council resolution in April 1993. This was followed by an agreement on its demilitarisation between UNPROFOR, the Bosnian Government and Bosnian Serb military commanders, signed on 17 April of that year.
In June 1993, the UN suggested that up to 36,000 troops could be necessary to implement the safe areas concept. The United Kingdom, France and the Netherlands responded well, but many others did not. The total committed amounted to only 7,500—a significant shortfall. This has had substantial implications for the safe areas policy. A Dutch contingent of UNPROFOR troops was deployed to Srebrenica to replace the original Canadian contingent.
The reality is that neither side properly observed the provisions on demilitarisation. It is this that lies at the root of events over the past few days. For three months, there have been sporadic attacks by each side against the other. Some 450 Dutch troops were in Srebrenica when fighting escalated over last weekend.
During that fighting, one Dutch soldier was killed by Bosnian Government forces on 8 July, and 30 Dutch soldiers were taken by the Bosnian Serb army as they withdrew from outlying observation posts to a blocking position 1.5 km to the south of the town. On the evening of 10 July, Bosnian Serb troops launched an infantry attack against this position, the Dutch returned fire, and the attack was abandoned.
At about midday on 11 July, however, Bosnian Serb forces launched a further attack, using mortars and tanks. Srebrenica town came under fire, with shells hitting the hospital and the Dutch compound. The Dutch commander requested NATO close air support. Two missions were launched, resulting in the destruction of Bosnian Serb army tanks. Meanwhile, Dutch troops helped to evacuate the hospital and withdrew from the compound, as it was under heavy shelling and undefendable.
The Dutch blocking position was bypassed, and, at about 1800 hours, Dutch UNPROFOR troops withdrew northwards to their compound at Potocari. They took with them some 2,500 displaced persons and some 80 to 100 who are wounded. Latest reports indicate that some 30,000 displaced persons are now in the Potocari area, several thousand of them in and around the Dutch compound, and that Bosnian Serb forces now effectively control the whole of the Srebrenica enclave.
I have spoken this morning to the Dutch Foreign Minister, Mr. Van Mierlo. He confirmed that the Dutch troops remained in their compound. He has no reports of casualties. The compound is not at present under attack, but food and water supplies are running low. Dutch commmanders are in touch with General Mladic, who is now is Srebrenica, about getting relief to the displaced persons.
We are in close touch with our allies and friends about the next step, and I have instructed our chargé in Belgrade to speak to President Milosevic. Our immediate priorities

are to get food, water and medical help to the displaced persons in the Potocari area and to offer any help to the Dutch that they need; secondly, to safeguard the other enclaves and in particular the British forces in Gorazde; thirdly, to pursue action in the United Nations Security Council in response to this Bosnian Serb aggression. Our overall objective should remain, despite the difficulties, to restore Srebrenica as a safe area, but on the basis of a genuine implementation of the demilitarisation agreement of April 1993.
On the humanitarian situation, I spoke to the United Nations High Commissioner for Refugees last night. I understand that UNHCR is seeking to negotiate access to provide help to the to displaced persons and assistance to those who expressly wish to leave. We have offered technical assistance to UNHCR from Overseas Development Administration experts in the area.
On the position in the other enclaves, there is continued sporadic shelling around Zepa, which is guarded by Ukrainian forces. There are no reports of increased activity by Bosnian Serb forces around Gorazde. Hon. Members will nevertheless share my concern about the safety of British troops there.
We are in constant touch with UNPROFOR commanders on the ground about developments, and we shall take appropriate measures to safeguard the security of our troops. Part of the rapid reaction force is deployed in theatre, where it will be able to support UNPROFOR's political and humanitarian objectives.
At the United Nations we, the United States, France, Germany and Italy are co-sponsoring a draft resolution which was circulated yesterday evening. This condemns the Bosnian Serb offensive; demands that the Bosnian Serb forces withdraw immediately from the Srebrenica area, that the Bosnian Serbs immediately release all detained UNPROFOR personnel and that all parties allow unimpeded access for the High Commissioner for Refugees and other humanitarian agencies to the safe area to alleviate the plight of the civilian population; and requests the Secretary General to use the resources available to him to restore the safe area status of Srebrenica. I look to see a resolution along these lines in New York today.
Beyond those immediate priorities, we have to consider the implication of these events for the political process and for the future of the UN forces. I am seeing Carl Bildt, the new European negotiator, immediately after this statement. He has already travelled extensively in the region, and has had three lengthy negotiating sessions with President Milosevic.
I will be discussing with him how he can use his channels to the parties to help stabilise the situation in Srebrenica, as well his broader objective of a negotiated settlement to the Bosnian conflict and mutual recognition between the republics of former Yugoslavia. Later today, Mr. Bildt will meet the contact group to discuss these developments.
On the future of UNPROFOR, my right hon. Friend the Prime Minister told the House yesterday that the continuing fighting in Bosnia was putting the future presence of the United Nations forces at risk, and that the warring parties had to indicate soon that they were prepared to return to the negotiating table to reach a political solution. That remains the position.
There is no question about the value of UNPROFOR's work. This is the largest peacekeeping operation in the history of the United Nations. Forty thousand troops are involved, drawn from almost 40 countries. They have saved tens of thousands of lives. Casualties in the Bosnian war have fallen from 130,000 killed in 1992 to 2,500 in 1994. They have contained a conflict which threatened a wider Balkan war. They are providing support for more than 2.7 million people in Bosnia who have been affected by the war.
But to operate, they require co-operation from the parties. UNPROFOR is not configured to fight a war. We must rely on the judgment of UN commanders on the ground as to whether they remain able to carry out their mandate; so withdrawal must remain an option. The structure for a political solution is there if the parties choose to use it, but they have to recognise that negotiating time is running out.

Dr. David Clark: I thank the Secretary of State for coming to make the statement, and congratulate him on his new appointment. I wish that he were here in rather less sombre circumstances.
Clearly, we are in a serious position. The whole House will share the Foreign Secretary's condemnation of the Bosnian Serbs for the manner in which they have ignored the wishes of the civilised world and overthrown a United Nations safe area. It is an outrageous act of aggression, which places the lives of thousands of innocent people in jeopardy, and the world cannot simply sit by.
The continued presence of UNPROFOR is something with which we concur. We still believe that a worthwhile job is being done in Bosnia by British troops and our allies in UNPROFOR and, as long as our troops are there, doing a worthwhile job, we hope that we can support them.
However, our immediate concern must be for the people of Srebrenica, who are being forced out of their homes in their thousands, often for the second or third time. They are experiencing ethnic cleansing, not only once or twice but sometimes three times. Will the Foreign Secretary tell us a little more about his plans and those of the United Nations for ensuring that those unfortunate people are provided with food and shelter? What negotiations are taking place with the Bosnian Serb authorities so that we can get food to the refugees there?
Will the Foreign Secretary also tell the House what consultation he has had with the French authorities? We understand that they favour a much more robust military approach to the retaking of Srebrenica. What consultation has the Foreign Secretary had with the French authorities, and what is the Government's view of the French proposals?
What is the position of the rapid reaction force? We heard a great deal about it when it was announced five or six weeks ago. We understand from the Foreign Secretary's statement that the rapid reaction force is in the vicinity of Gorazde, but why was it not called to be sent to Srebrenica? After all, we had three days' notice of what was happening in Srebrenica. Where was the rapid reaction force? Where were the guns that would have filled the gap between air strikes and hand guns? That question must be answered.
What is the Government's policy towards the other safe areas, especially those in the eastern enclave? What are the Government doing to try to ensure that demilitarisation in those areas is a fact, not a myth? There is no doubt that, unless there is demilitarisation, or unless one has thousands and thousands of troops, one cannot defend the safe areas. Will the Foreign Secretary accept that no action in Srebrenica can be seen in isolation from the rest of Bosnia, especially the two safe areas in the east that I just mentioned?
Of course, the whole House is doubly concerned about Gorazde, because troops from our country are there. What is the position of British troops in Gorazde? Have they got plenty of reserves? Do they have the facilities to protect themselves? Do we have the assurance that the rapid reaction force, which the Foreign Secretary mentioned, will be there in time? It is no use arriving too late in that situation.
May I press the Foreign Secretary on the basic issue of consultation? At the end of the day, both sides agree that there is no military solution in Bosnia; there will have to be a political solution. Will he confirm that there have been no discussions between the contact group and the belligerents in Bosnia for a number of months? Will he say a little more about when such contacts will be renewed, because they are critical?
Finally, what has happened in Srebrenica came about because of a mismatch between the commitments given by the world through the United Nations, and the resources made available by the countries that make up the United Nations. Will the Foreign Secretary impress on other countries through the United Nations that it is imperative that this cannot happen again?
It is no use making pious claims unless other countries are prepared to try to ensure that there is sufficient force to ensure those aims are adhered to. What we have to do in the international councils is say what we mean and mean what we say; otherwise, it is simply not worth doing.

Mr. Rifkind: May I thank the hon. Gentleman for his personal good wishes? I certainly agree with him that, when the Security Council expresses a policy, it is necessary that those who vote for that policy and support it provide the means of implementing it. I am proud that the United Kingdom is one of those countries which has responded, both in the spirit and in the letter of what has been called for.
The hon. Gentleman asked me a number of questions, to which I shall try to respond briefly. Refugees are the immediate priority. There are up to 30,000 or 40,000 refugees from Srebrenica, many of whom were in Srebrenica as refugees. The immediate requirement is their food and shelter. The UNHCR is currently engaged in providing that, and of course we shall give full support to that objective.
The hon. Gentleman asked me whether we had had contact with our French allies. I did indeed speak to the French Foreign Minister last night. The French have indicated publicly their interest in a possible military response to reverse the situation in Srebrenica. We are awaiting more information from them as to the details of what they have in mind.
Clearly any military operation would be complex. Srebrenica is 170 km from central Bosnia, and therefore any forces going by land would have to continue along a


very long stretch of road, most of which is controlled by Serb military forces. Within Bosnia at the moment, there are no helicopters of a kind able to transport such military force. Having said that, the French have indicated an interest in a military response. We need to hear the precise details of what they have in, mind and whether that is perceived to be a militarily realistic solution to this matter.
The hon. Gentleman also asked me about the rapid reaction force. At the moment, some 1,100 additional British troops have arrived in Bosnia, as well as the additional French reinforcements. The 24 Airmobile Brigade has not yet been deployed, because we need to get the agreement of the Croatian Government and the Croatian authorities. Much of that work has now been done, but it has not yet been completed. If the rapid reaction force wishes to be involved in Srebrenica, it will have to traverse that route of 170 km of Serb-held territory. Therefore, the hon. Gentleman must reflect on whether that is a realistic obligation to impose upon it.
The hon. Gentleman asked about the safe areas policy as a whole. The key to the Srebrenica area is whether the Serbs can be persuaded to withdraw from Srebrenica in exchange for the demilitarisation of the town. That is not an unrealistic objective, because both sides agreed to that policy two years ago. It is unfortunate that neither side implemented what they had committed themselves to.
The hon. Gentleman asked me about consultation with the various parties. The most recent development, of course, was the appointment of Carl Bildt, who has been working very closely with Mr. Milosevic to seek a solution involving the recognition of Bosnia-Herzegovina and the suspension of hostilities. Some considerable progress has been made, but clearly there is still a long way to go.

Mr. Tom King: Did my right hon. and learned Friend hear the comments of Dr. Boutros-Ghali on the radio this morning, in which he seemed to imply that the military response in a particular situation should depend on the individual Government to whom the troops belong—in this case, the Dutch Government? Will my right hon. and learned Friend confirm that, in this very difficult and dangerous situation, it must be the responsibility of the commanders on the ground to determine the correct military response?
In connection with the serious humanitarian situation facing us, is it not clear that the only immediate prospect of help must lie in his last plea: there must be the clearest assurances on demilitarisation, lack of military activity, from within the enclave outwards? We would then be entitled to demand the withdrawal of the Bosnian Serb forces.

Mr. Rifkind: I very much agree with my right hon. Friend's last observation. Clearly, one of the major causes of tension in recent weeks has been military activity from both the Bosnian Government forces in Srebrenica and the Bosnian Serb forces on the outside. That does not excuse the aggression of the past 48 hours, but we must be aware of the background. Clearly, demilitarisation would be a way in which to ensure the continuation of the enclave and the safety of those within it.
So far as Dr. Boutros-Ghali's comments are concerned, I am sure that the Secretary General recognises more than most of us the crucial requirement that any use of military force in Bosnia-Herzegovina must be based on an

assessment by the force commanders and their recommendation that the objectives for which it was used could be realised in that way.

Mr. Menzies Campbell: Does not the sad history of Srebrenica, which the right hon. and learned Gentleman has just related, show that to call an area a safe area, without either the political will or the military resources to keep it safe, is worthless? Is it not now time to try to re-establish the last vestiges of the authority of the United Nations in Bosnia, and would that not be accomplished by the creation and maintenance of a permanent humanitarian route into Sarajevo over Mount Igman?

Mr. Rifkind: In answer to the hon. and learned Gentleman's first question, clearly there are two points at issue. There is not only the unwillingness of the international community as a whole to provide the additional forces necessary, but the question of the mandate that would be needed to enforce a safe area if military activity were initiated by any of the parties against it. As for the other matters that the hon. and learned Gentleman raised, I agree with his observations.

Mr. David Howell: We all appreciate that it is the clear thinking of my right hon. and learned Friend in his new job that is needed in the present agonising situation, rather then more pious hopes and cliches. I applaud his ambition that we should somehow restore the safe area around Srebrenica, and that we should not abandon the refugees.
However, the question hangs in the air: can we really deliver on those ambitions? Can we protect the refugees, as they are not being protected around Srebrenica today? Has the time not come to reconsider, and will my right hon. and learned Friend please reconsider with his colleagues and other Foreign Ministers, the restraints that prevent the so-called Bosnian Muslims from defending themselves more effectively, as they are desperately trying to do around Sarajevo even now?

Mr. Rifkind: One recognises that there are conflicting interests that we are trying to safeguard. I assume that, in the latter part of his remarks, my right hon. Friend was referring to the arms embargo. The fundamental problem remains, as it has always been, the fact that it is not possible to reconcile the United Nations lifting the embargo with the continuing UN presence in Bosnia-Herzegovina. So far, when faced with that predicament, the Bosnian Government have always concluded that they wished the UNPROFOR presence within Bosnia-Herzegovina to continue. I believe that that is a correct judgment, and we must wait to see whether it remains their view.

Mr. Tony Benn: Looking back on that long and bitter civil war, and from the Foreign Secretary's statement, is it not clear that the most successful part of what we have done has been the humanitarian aid? Many lives have been saved, and many people who would otherwise have starved have been supplied; whereas military interventions, including air strikes, have been the least successful, as has been most recently established.
Can the Foreign Secretary give an assurance that, when we assess what can and cannot be done, the one thing that will not be abandoned is the humanitarian aid, and that what will be considered most carefully is whether it is wise to enter the war as a participant military force?

Mr. Rifkind: I agree with the general thrust of the right hon. Gentleman's remarks. The humanitarian achievements of the United Nations in Bosnia have been of a remarkable, perhaps an unprecedented, kind. It is probable that more lives have been saved in Bosnia as a result of UN intervention than that organisation can claim in any previous UN operation in any part of the world. Therefore, it is crucial that that huge benefit is not recklessly thrown away because of other disappointments and frustrations.
Of course, if the UN can use both its mandate and the forces available to it to achieve other benefits, so long as they do not jeopardise the humanitarian operation, that is well worth striving for, but I entirely accept that there is a limit to what one can achieve unless one is prepared to cross the rubicon and become a combatant in a war. The UN is not prepared to do that.

Mr. John Biffen: I warmly congratulate my right hon. and learned Friend on his appointment as Foreign Secretary.
Does he ever reflect on the wisdom that echoes down the ages in Bismarck's comment that the Balkans were not worth the bones of a single Pomeranian grenadier? In that context, is it not incumbent upon us to make the most realistic assessment of our current military commitment in that part of the world, of what it seeks to fulfil, and of how those two can be reconciled—and to determine that, ultimately, that judgment will be undertaken by a British Government answering to a British Parliament?

Mr. Rifkind: I thank my right hon. Friend for his personal good wishes. On the final point that he raised, I can confirm that any question about the future of the British forces in Bosnia-Herzegovina will be a matter for the Government and Parliament of this country, and we will not seek to transfer that obligation to any other place.
So far as the thrust of his main question is concerned, while we certainly take the view that there is no justification for the United Kingdom becoming involved as a combatant in the war that is taking place in Bosnia, we do believe that there is an obligation upon this country—as upon other countries—to do what can be done to help save lives and to reduce the nature of the conflict. We have national interests which would be seriously affected if the war were to continue indefinitely, or spread to other parts of the Balkan region.
Therefore, if there is a role for British military forces that does not involve them becoming combatants but which can help advance some of those interests, I believe that that objective should be pursued. While recognising the limits of what can be achieved, we must not ignore the very real benefits which are available.

Mr. Denzil Davies: Is the Secretary of State aware that I have constituents with sons serving in the Royal Welch Fusiliers in Gorazde, and that the fusiliers have been placed by somebody in as exposed a position as the Dutch were at Srebrenica? Can he assure the House that added protection will be provided for the fusiliers at Gorazde? My constituents want to know where the rapid reaction force is, because their impression is that it is neither very rapid nor much of a force.

Mr. Rifkind: I know that the right hon. Gentleman met the Minister of State for the Armed Forces yesterday, and discussed various ways in which we can enhance the

protection available to the British troops in Gorazde. So far as the rapid reaction force is concerned, the right hon. Gentleman will recognise that the approval of the Croatian Government and authorities is required if 24 Airmobile Brigade is to use Ploce on the Croatian coast.
It has been suggested that the authorities will agree, but there are some final discussions which must be resolved before the force can deploy. Notwithstanding that, 1,100 British troops have arrived in Bosnia in addition to those who have been there in the past. They are taking part in the multinational brigade part of the rapid reaction force.

Sir Patrick Cormack: I wish my right hon. and learned Friend well in all he does. Does he agree that what is at stake is not just Bosnia and the poor innocent civilians who are fleeing, but the whole credibility and authority of the UN itself? Does he agree that there are occasions when it is entirely proper for the UN to take armed action against those preventing a UN mandate from being fulfilled? Does he accept that, if Karadzic's Serbs—a gang of brigands who do not represent the whole Serbian population in Bosnia—get away with cocking a snook at the international community, it will be a recipe for international anarchy?

Mr. Rifkind: My hon. Friend makes his point, and I understand his strength of feeling on the subject. But the UN can only be expected to achieve results if its member states are prepared to provide assistance to the UN. The harsh and unavoidable truth is that there are very severe limits both on the number of forces that member countries are prepared to send to Bosnia and on the mandate that they are prepared to accept should be the basis on which the forces are sent. Given that fact, some of the criticism that the UN has received in the past couple of years has been misdirected and totally unjustified.

Mr. David Winnick: Is the Foreign Secretary aware that this has been the saddest and most humiliating blow that the UN has suffered since the organisation was set up? Does not the responsibility lie with the leading democracies, for their sheer lack of resolve in dealing with criminal aggression?
Is it not clear that the Serbian military forces were encouraged day in, day out in the past few weeks by the knowledge that there would be no military retaliation on the part of the UN? Those troops knew that they could carry out aggression such as has been committed, and they knew that they could get away with it. The failure lies with the leading democracies. It has been a shameful day for the international community, and the Foreign Secretary should recognise that.

Mr. Rifkind: It is easy for the hon. Gentleman to make bellicose noises, but unless he wishes to advocate the deployment of many tens of thousands of British and other forces to Bosnia in a war-fighting role, I am afraid that his protestations, although no doubt sincerely felt, add little to resolving the real issues before us.

Mr. Cyril D. Townsend: Will my right hon. and learned Friend confirm that UN peacekeeping, as opposed to peace-making, can be carried out only with the support of the parties in the area, and that safe zones can be defended only by conventional warfare, which in reality—I believe rightly—the UN Security Council will not authorise? Is not the conclusion that there is a role for


the UN in Bosnia seeking diplomatic progress and looking after desperate humanitarian problems, but currently no role for UNPROFOR?

Mr. Rifkind: I agree with part of what my hon. Friend says. Clearly, the United Nations must recognise what it is capable of achieving, and the limitations of that capability. But within that framework, UNPROFOR is continuing to provide a viable asset for the UN, which could not be resolved in its absence. The extent to which convoys have been able to deliver aid would be crucially less without military escorts in many areas. The extent to which the Croat Muslim reconciliation in central Bosnia requires to be monitored needs a military presence and that, too, could fall apart if UNPROFOR withdrew.
In those and a number of other areas, I believe that UNPROFOR continues to be of considerable significance, which implies that we need a military presence, but not at any cost. The balance of advantage and risk must be constantly monitored, and we, along with other contributing countries, are currently engaged in that.

Mr. Calum Macdonald: As the Foreign Secretary twice referred to the need to listen to the judgment of UN commanders on the ground, why has he conspicuously failed to give his full backing to General Smith's plan to relieve the siege of Sarajevo by opening the route over Mount Igman? Is not that failure to give General Smith the Government's backing a green light to the Bosnian Serbs to carry on defying the UN with impunity?

Mr. Rifkind: The hon. Gentleman is totally misinformed. We are entirely willing to support any proposal that General Rupert Smith or the force commanders believe is capable of delivering aid to either Sarajevo or any other part of the country that requires it. The hon. Gentleman must not make claims based on a misunderstanding of Her Majesty's Government's position. I know that the force commanders have been looking at ways of using the Mount Igman route. If they conclude that that is a realistic way to deliver aid, we shall be happy to support them.

Sir Cranley Onslow: In view of what my right hon. and learned Friend said a moment ago about the French Government, is he confident that it understood in Paris that the UN forces are in Bosnia for humanitarian and peacekeeping purposes, not to get sucked into a war?

Mr. Rifkind: Yes, I believe that the French Government share our view about the role of the UN forces. They have made a number of clear and unequivocal statements to that effect. They have been quoted in the past 24 hours as asking whether UN forces could be used to relieve or reverse the situation in Srebrenica. Clearly, the priority now with regard to that suggestion is to see exactly what they have in mind, in what way military forces could be used, and whether there would be a prospect of success.

Miss Kate Hoey: Does the Foreign Secretary agree that, when we strip away all the fine words, conferences and good intentions, the real policy of the international community over the past three years is to drip, drip, drip, and give in to the Serbs time after time?

Can he give one example of the Serbs keeping their word? Is it not time to lift the arms embargo and allow the Muslims to defend themselves?

Mr. Rifkind: The sad but undeniable fact is that all the parties to the Bosnian dispute have given their commitment in writing on many occasions and failed to deliver on many occasions—that phenomenon is not peculiar to one side in the conflict. One is entitled to say to the hon. Lady that the main achievement of the UN forces is that hundreds of thousands of men, women and children are alive today who would not be alive but for the UN presence.

Sir Geoffrey Johnson Smith: I accept my right hon. and learned Friend's analysis that to withdraw now would be a policy of betrayal and despair, and that to enforce military action would be a policy of folly. I am glad that he has reacted as he has to the French proposal. But does he agree that, if we are to be effective at delivering humanitarian relief and protecting refugees, it is imperative that, when action must be taken, it is taken swiftly, decisively and with conviction, and that too often none of those qualities has been apparent?

Mr. Rifkind: I agree with that observation. It is very important that the force commanders are given the support they require, so that, if they do wish certain action to be taken, they are not prevented from carrying out that action by considerations that are not appropriate or relevant.

Mr. Andrew Faulds: Would the right hon. and learned Gentleman accept my congratulations on his achievement in becoming Foreign Secretary? Many of us would regard his new job as a fitting continuation of the admirable tenure of his predecessor. But does he now realise that it is absolutely essential, if he is going to prove himself in his new job, that he has to mount the resolution of the French Foreign Secretary and do something about the criminal activities of the Serbs?
Does he not realise that humanitarian protection cannot be provided without the use of military power? If our forces in Bosnia are to have any meaning or significance, they have to be used. Would it not be perhaps some strength to him to rid the western view of its pusillanimity so far—to ask our chaps in Gorazde whether they want to take action against the criminal activities of the Serbs? If the Government have not got it, those chaps have certainly got the guts and the balls to do it.

Mr. Rifkind: The hon. Gentleman is, of course, correct to say that, in order to achieve the humanitarian objectives of the United Nations, the military has a role to play and a contribution to make. It was with that very much in mind that the United Kingdom, France and the Netherlands announced the sending of substantial reinforcements to Bosnia. A significant proportion of those forces are now in theatre and will help the force commanders to protect convoys and get the aid through to those who require it.

Sir John Stanley (Tonbridge and Mailing): Will my right hon. and learned Friend confirm that the British contingent to UNPROFOR does not have the role, the numbers or the equipment with the surrounding contingents to carry out a war-fighting role in Bosnia?


Will he also confirm that it is no part of the British Government's policy that their present role should slide into a war-fighting role in that country?

Mr. Rifkind: It is crucial that the remarks made by my right hon. Friend are observed, not only in the policy that is pursued by troop-contributing countries, but in the rhetoric that their political spokesmen use. One of the great mistakes of the past three years has been for the United Nations, NATO and individual Governments to use a rhetoric that implies a capability that has never been provided.
It does no good service to the people of Bosnia-Herzegovina to create expectations that cannot be delivered. It is far better to concentrate on the real benefits that the United Nations can provide in Bosnia. Those are already significant and substantial, and I believe that that is the way in which we can properly win the trust of the people of that country at present.

Mr. John McWilliam: Will the Secretary of State accept my personal congratulations on his appointment, as an old council friend? Will he also accept that there are serious doubts, first, that the rules of engagement that are currently involved are sufficient to protect our forces in theatre, and, secondly, that the rapid reaction force, as it is being deployed, will be able to secure the safe havens? Thirdly, can he explain to the House why, when he spoke about a political solution, the name of Radovan Karadzic, who steadfastly refuses to come to the conference table, was never mentioned?

Mr. Rifkind: I thank the hon. Gentleman for his kind opening remarks. Regarding the position of Mr. Karadzic, obviously any political settlement must be acceptable to the Bosnian Serbs as well as to the Bosnian Government if it is to have any prospect of being achieved. The efforts that have been made in recent weeks have involved seeking to use the influence of Mr. Milosevic, and that has been beneficial in several aspects—such as in the release of the hostages some weeks ago—so obviously we must be prepared to consider not only that route but any other that might be productive of success.

Mr. Michael Colvin: It could not be a better time to have a Foreign Secretary with so much experience in defence matters. However, may I ask my right hon. and learned Friend what lessons have been learnt from the Srebrenica debacle that are applicable in Gorazde, where we have deployed 300 Royal Welch Fusiliers and many Sappers?
Following the earlier question about rules of engagement, will those rules change if those troops have to take off their blue helmets and put on brown helmets as members of NATO?
Will my right hon. and learned Friend confirm that our rapid deployment force would not get anywhere if it were not for the assistance provided by our ally the United States of America,, with its heavy lift capability? Should we not have that capability ourselves?

Mr. Rifkind: I pay tribute to the United States for providing that lift capability. We appreciate its assistance very much, and I am sure that my right hon. Friend the Secretary of State for Defence will consider the question of the United Kingdom's having the same capability.
As to the rules of engagement, we are in constant contact with the force commanders to assess whether the current rules of engagement are sufficient for their requirements. In the past two or three years, the rules of engagement have changed a number of times, and we are always ready to consider fresh changes should they prove necessary in order to meet our objectives in implementing the mandate.

Mr. Peter L. Pike: In addition to the other points of concern rightly expressed by hon. Members, does the Foreign Secretary recognise the impact that the situation in the former Yugoslavia is having on the adjacent newly emerging democracies, such as Romania? What discussions are going on with those countries to ensure that their progress towards democracy and a free market economy is not adversely affected by what is occurring?

Mr. Rifkind: I will, as it happens, be meeting the Romanian Foreign Minister in London tomorrow. We are conscious of the fact that, in imposing sanctions against Serbia and Montenegro, we have been required to introduce measures to ensure that there is no damage to neighbouring countries.

Sir Jim Spicer: Does my right hon. and learned Friend accept that the recent incident occurred within a very short period and came as a great surprise to everyone, including those people on the ground? In those circumstances, is it not correct that all we can do is rely on our commanders on the ground to take the right decisions? Is not their room to manoeuvre seriously curtailed by the lack of a back-up force? In view of what might happen in the next two or three months, is it not a top priority to get the rapid reaction force on the ground somewhere, so that it can be deployed if necessary?

Mr. Rifkind: I agree with what my hon. Friend has said, with one important qualification, which I am sure he will accept. It is no part of the purpose of a rapid reaction force to become a combatant in the conflict. Its purpose will be to assist the force commander in the protection of UNPROFOR, and to assist with the delivery of United Nations humanitarian supplies to those who require them.
We must not allow ourselves to believe that the rapid reaction force has either the size or the military capability to become a war-fighting machine. It does not have that capability, and we would be perpetrating a cruel deception if we implied otherwise.

Mr. Robert N. Wareing: May I first congratulate the right hon. and learned Gentleman on following his distinguished predecessor as Foreign Secretary?
Was not the entire UNPROFOR operation undermined from the outset by the uneven-handed approach of the international community? Bosnian Serb villages are put to the torch by commando raids out of places like Srebrenica, and Croatian shells land on Croatian Serb villages near Knin, but the Serbs see air strikes whenever they retaliate. Should we not regard the situation as a civil war? The United Nations has no possibility of solving anything by taking sides in a civil war.

Mr. Rifkind: I agree with the hon. Gentleman that it would be unwise for the United Nations to take sides. However, I cannot agree with the tenor of his other


remarks. It is the judgment of Her Majesty's Government and other Governments that prime responsibility for the aggression—including the present situation facing the people of Srebrenica—lies with the Bosnian Serbs.

Mr. Robert Key: I congratulate my right hon. and learned Friend on his appointment, just as I congratulate, as ever, our troops on the ground and the staff at land headquarters in the Ministry of Defence on their professionalism.
Can my right hon. and learned Friend assure the House that the mission of our military personnel has a clarity of purpose that is not apparent to everyone in this country, and that the rules of engagement are shared between all of the allied forces on the ground? I assure my right hon. and learned Friend that, when the time comes to withdraw UNPROFOR troops, he will have very wide support.

Mr. Rifkind: I thank my hon. Friend. There is doubt in some quarters about the clarity of the United Nations mission, because there are calls from various quarters for the United Nations to have a different mission. As United Nations troops are constantly called upon to act as combatants without the force structure or the mandate to do so, the confusion in the minds of many observers is more the responsibility of those who call for such action than it is of the United Nations.

Mr. Frank Cook: May I assure the Secretary of State that my son has fulfilled his duties in Gorazde and is now safely back in Britain? However, that does not reduce my concern for serving men and women who do our bidding in bloody awful conditions. Anyone who has been there will know full well the complexities of their existence.
The Secretary of State has already alluded to the nub of the problem. Apart from humanitarian aid, our only success in the past 12 months has been in securing the release of the hostages who were held in custody for such an embarrassingly long time. That was achieved unquestionably with the active persistence and involvement of President Milosevic. In so doing, he downgraded Karadzic in everyone's eyes, and that man lost face considerably.
Will the Secretary of State give the House an assurance that the reports that Milosevic needs a relaxation of the sanctions on Serbia before he helps any further will not be heeded, and that the sanctions will become more stringent until he engages himself as energetically as he did previously?

Mr. Rifkind: Another great achievement in the past year has been further normalisation in central Bosnia, where the bulk of the British forces are found. The relationship between the Bosnian Croats and the Bosnian Government in that part of the country has improved radically. It is one of the benefits that we do not want thrown away by the departure of the United Nations forces.
With regard to sanctions, part of the discussions between Carl Bildt and President Milosevic concerned a possible package of measures whereby, in exchange for the recognition by Belgrade of Bosnia-Herzegovina with its present frontiers, there would be a suspension of certain of the sanctions that have been applied against President Milosevic's Government and country. That

would be of benefit if it could be achieved. It is too early to say whether we can look forward to the success of that initiative.

Sir Anthony Grant: Does my right hon. and learned Friend recall that, a few weeks ago, I asked his distinguished predecessor to bear in mind the military maxim that may have been from Bismarck—never reinforce a failure? Has not the attempt by the United Nations to solve the appalling civil war been a total and utter failure? Is not the distinction or the dividing line between the combat activity and the humanitarian activity of our troops becoming increasingly blurred? Will he ensure that the reinforcements will be sent in only to ensure the speedy return of British troops, and the sooner the better?

Mr. Rifkind: I do not believe that it has been a total and utter failure. While there have been massive disappointments in certain aspects of the policy, there have been equally great successes. A few moments ago, I mentioned the huge progress that has been made in central Bosnia. When I first visited that area, one had to travel around in an armoured vehicle. When I was last there, one was able to walk about without a flak jacket or any protection in large parts of central Bosnia, where civil war had been raging only 12 months earlier. That continues to this day. It is a large benefit.
It is precisely for that reason that we are reluctant to see the withdrawal of the UNPROFOR forces, as that would be bad news for the enclaves and the rest of Bosnia. We are concentrating our attention today on the problems facing the enclaves, but they are five relatively small areas in a much larger country, much of which is at peace. It is important, if at all possible, that it should remain at peace, and not return to the bloody conflict of 12 months ago.

Mr. George Galloway: What does the Secretary of State, who in his previous job had quite a line in bellicosity, say to the charge on the lips of hundreds of millions of Muslims around the world this morning, that, if oil was flowing in the streets of Srebrenica rather than just blood, 29 countries would quickly have assembled a vast armada of armies and air forces to come to the rescue of a sovereign state and a member of the United Nations that is being invaded and subjected to brutal aggression?
If he does not think that that Is a fair question, let him answer this one. Precisely why has the sovereign state of Bosnia-Herzegovina not been defended in the same way as the sovereign state of Kuwait?

Mr. Rifkind: I
have to say to the hon. Gentleman that, strength of his feelings, the contribution by western countries to the UNPROFOR force is very similar to the contribution made by a number of distinguished Muslim countries, such as Malaysia, Turkey and others, which part of the UN force and work.
The reality is that there is a fundamental distinction between Bosnia and the other examples that the hon. Gentleman uses. As he well knows, those who are fighting within Bosnia are Bosnian Serbs, Bosnian Croats or Bosnian Muslims. We have a situation which, whether or not we choose to call it a civil car, is a war between people who all have their homes in the same territory.
That makes it a fundamentally different situation from the invasion of a country by a foreign army, and therefore to suggest that the solution that was appropriate in Kuwait is relative in Bosnia is simply unpersuasive and does not commend itself to the British Government or any other Government of which I am aware.

Sir George Gardiner: Since it seems increasingly likely that British forces will have to be withdrawn from Bosnia, will my right hon. and learned Friend undertake—in close co-operation, of course, with his colleague the Secretary of State for Defence—total contingency planning, covering almost every detail, to ensure that no British soldiers' lives are lost in the inevitable and eventual withdrawal?

Mr. Rifkind: I can say to my hon. Friend that, over the past few months, NATO has been completing a substantial plan that would involve it being responsible for supervising the withdrawal of the UN force, if that should prove necessary. Virtually all the matters relevant to that plan have now been resolved, and therefore, if withdrawal, sadly, became necessary, I am confident that not only British but UN forces could be withdrawn in good order.

Mr. John Home Robertson: Has it occurred to the Secretary of State that things would have been very different if the United States had shown a fraction of the commitment that the Netherlands has given to the United Nations effort in Bosnia? As, I presume, the attack against Srebrenica would have been resisted had the new United Nations rapid reaction force been in place, will the Secretary of State now tell us whether that pre-emptive strike will be rewarded with success? Are we going to do anything about it?

Mr. Rifkind: The United States Government have made a major contribution, both in the air and at sea, to the policy of the United Nations. With regard to the rapid reaction force, we can make no criticism of the United States Government, who have made clear their determination, with all the power at their disposal, to provide their contribution to the financial support needed for that force, and also to provide lift facilities to transport the forces to Bosnia-Herzegovina, and in a number of other ways to enhance the equipment available to the force commanders.

Mr. Bill Walker: I congratulate my right hon. and learned Friend on his new job, which he got on merit.
Will he confirm that the safe areas were never realistically able to be defended by the troops deployed there; that the rapid reaction force is not a military force capable of conducting aggressive warfare; and that it is there to defend the troops who are there on humanitarian aid? Will he also confirm that, in the event of any redeployment, of whatever kind, including withdrawal, that force will be used to ensure the safety of the troops already there? It is about time we told those who are calling for aggressive action that we have neither the numbers nor the assets to carry out any realistic aggressive action in that country.

Mr. Rifkind: I thank my hon. Friend for his opening remarks.
With regard to the safe areas policy, the United Nations made it clear, when the safe areas resolution was passed, that to be confident in enforcing the safe areas resolutions would, in their judgment, require an additional 36,000 troops. Britain, France, the Netherlands and one or two other countries responded to that additional call for extra support. I have to say that the vast majority did not, so from that moment onwards, there was no way in which one could ensure, by military means, the defence of the safe areas.

Mr. Mike Gapes: Will the Foreign Secretary resist calls from the bombers and the "do something" brigade, and calmly consider the situation and the realities? Will he also go back to the Security Council and get it to adopt a more sensible policy in future—not calling for safe areas which are not and never can be safe, but agreeing, before adopting such resolutions in future, the resources necessary to realise them, rather than afterwards hoping that something will turn up?

Mr. Rifkind: Yes, there are times when United Nations resolutions or statements can have a persuasive effect on a course of action, and therefore one recognises that the language used can sometimes be beneficial. I certainly share the hon. Gentleman's anxiety that, if specific commitments are being given by the Security Council, the United Nations or any national Government, they should be given only when there is a clear will and ability to ensure the implementation of such decisions if they should be called upon to do so. That is perhaps where the problem has been most apparent in recent times.

Mr. Barry Porter: Many years ago, during a very undistinguished academic career, I wrote a bit of a paper about international relations between the wars, with special reference to the League of Nations. All I can say is that I have a feeling of deja vu at the moment. Is not the reality that we pass these resolutions at the United Nations, the Americans are not keen, the Germans show a distinct lack of enthusiasm, and, to an extent, the whole thing is a waste of time? If we want to be an International Red Cross or a Salvation Army, fine, but that is as far as we can go, and that is the reality.

Mr. Rifkind: My hon. Friend is right to emphasise the limits of what can be achieved by the United Nations. But if one compares what has been achieved by the United Nations during the past few years with what was achieved between the wars by its predecessor, the League of Nations, one sees that the world has moved on, and that the UN has far more to its credit than the League was ever able to achieve. It may be that there are opportunities yet not fully exploited.

Mr. John Austin-Walker: I welcome the Foreign Secretary's response to the question by my hon. Friend the Member for Liverpool, West Derby (Mr. Wareing), but earlier he referred continually to the "warring parties". Will he now acknowledge that the legitimate multi-ethnic Government of Bosnia-Herzegovina has consistently shown its willingness to reach a negotiated settlement, whereas the Serbs have not?
Why does the right hon. and learned Gentleman find it surprising that Bosnians in UN safe havens who are totally unprotected should seek to defend themselves? How many


of the rapid reaction force, to the deployment of which he has referred, remain in Britain and the home countries that have agreed to send them?

Mr. Rifkind: I think that the hon. Gentleman in the latter part of his question is referring to 24 Airmobile Brigade. We are ready to begin the deployment of that brigade, but we require the agreement of the Croatian authorities, because it is necessary to use the town of Ploce on the coast in order to receive them. Much progress has been made in that area, but some formalities remain to be completed; we hope that they will be completed literally during the next two or three days.

Mr. John Wilkinson (Ruislip-Northwood): Vulnerability is not of itself a virtue, either for our troops in Gorazde or for the rapid reaction force. If my right hon. and learned Friend and his counterparts from Holland and France want to influence the situation on the ground, they may well have to use the only effective instrument that the alliance possesses, which is its air power. If it is not to be used as a mere pinprick, as a demonstration, it will have to be used in a sustained, concentrated and precise manner; otherwise, the Serbs will simply be goaded to further action. As I said, vulnerability is not a course of action that can be approved by the House.

Mr. Rifkind: I have listened carefully to my hon. Friend, and I know his great expertise on the use of air power. I would add that an additional requirement if air power is ever to be used is that it must be used in a way that does not endanger the safety of the many thousands of UN forces on the ground. That is an important factor, which is bound to be relevant as long as the UN is in Bosnia-Herzegovina.
Even if the UN withdrew from Bosnia, there would be substantial limits to what we could expect air power alone to achieve. In the past, it has been useful in softening up an enemy, if those in charge were then prepared to complete the process on the ground—which is what happened in Kuwait. By itself, however, it is unlikely to achieve the objectives that my hon. Friend and I share.

Mr. D. N. Campbell-Savours: Have not the Bosnian Serbs realised the truth—that trading of hostage-taking against air strikes works, because the western powers give in? Is not the reality that the Bosnian Serbs are now running amok? They are running rings around us, and making us all look like fools.

Mr. Rifkind: The reality is that air power has been used within the past 48 hours. It is available whenever the force commanders recommend its use. I do not believe that, in the first instance, the hon. Gentleman or any other politicians should decide whether to use air power on a particular occasion; in the first instance, such a decision must be based on a recommendation from those with responsibility for the well-being and safety of their forces. They must make their judgment in the light of the circumstances.

Mr. David Atkinson: My right hon. and learned Friend has implied that the active good will and assistance of President Milosevic is an essential ingredient in the achievement of any political solution in Bosnia. What thought has been given to the conditions that Serbia would need to satisfy should it seek any future association with European institutions such as the Council

of Europe, the Organisation for Security and Co-operation in Europe and the European Union, from which it has rightly been excluded so far?

Mr. Rifkind: Of course we look forward to the day when such an association might be possible, but it clearly cannot be considered at a time when the international community deems it appropriate to impose sanctions against the Government in Belgrade because of their support for the aggression in Bosnia-Herzegovina. A change in that position is clearly a precondition for the normalisation of relations with President Milosevic's Government in respect of other matters.

Mr. Tony Banks: May I echo the Foreign Secretary's earlier words, and say that surely the Rubicon has been crossed? By invading the safe haven of Srebrenica, the Bosnian Serbs have declared war on the United Nations. In the event of their not meeting the various requirements that have been communicated to them, what action will be taken? Has any time span been imposed?

Mr. Rifkind: I am not sure what action the hon. Gentleman is advocating. It is easy to use expressions such as "declaring war on the United Nations", but the hon. Gentleman must reflect on whether he wants much larger numbers of forces to be sent to Bosnia-Herzegovina to become involved in combat with the Bosnian Serbs, for however long, and with whatever consequences. If that is not the hon. Gentleman's objective, he must, in all fairness, recognise the limits of what he can expect the United Nations to be able to deliver.

Mr. Tim Devlin: Does my right hon. and learned Friend accept that, if the United Nations does nothing about the fall of Srebrenica, its credibility is completely gone? All we will be able to do then is accept that we have got it wrong, take our troops out, and either bring them back in some other guise—with a proper command structure and a proper objective, perhaps under European control—or leave them at home in their barracks, where at least they will not be killed by a bunch of bandits.

Mr. Rifkind: As I said earlier, I believe that the objective over the next few days should be to bring about circumstances in which the Bosnian Serbs agree to withdraw from Srebrenica, and the Bosnian Government accept the need for the town and the enclave to be dimilitarised. That is not unreasonable; after all, in 1993 both parties agreed to implement just such a policy.
It is unfortunate that, over the past two years, neither has felt able to comply with that commitment. If they felt able to do so now, it is still possible that a solution could be achieved that would enable the enclave to continue to provide a haven for those who live within it, and enable the Bosnian Serb forces to withdraw. That is, at least, an objective that we should pursue.

Mr. Tam Dalyell: Can the Foreign Secretary conceive of any circumstances in which air power could be used without creating a real threat to United Nations forces on the ground? Can the House of Commons have the assurance that Her Majesty's Government are advising all others, particularly the Americans, not to use further air strikes?

Mr. Rifkind: Yes, I believe that there are circumstances in which the use of air power could be beneficial, particularly with regard to what is called close air support,


where air power is used to provide added protection for UN forces that might be under attack, as we have seen in recent times. There are therefore circumstances in which it is appropriate, but clearly it must be used in a way that does not jeopardise the safety of the forces on the ground; that is why the dual key procedure has been evolved in the past three years to take account of that fact.

Mr. Jim Marshall: May I ask the Foreign Secretary to reconfirm that peacekeeping operations will be successful only if they have the consent of all the warring factions involved in the dispute? Does he further accept that, if that consent, whether total or partial, is seen to be withdrawn, withdrawal of troops is not a humiliation but could well be a necessity?

Mr. Rifkind: The hon. Gentleman is correct to say that, at the very least, peacekeeping in any country, not just in Bosnia, requires a minimum degree of co-operation from the parties concerned, or the only option available is to use peace enforcement, which is a different concept, requiring different military capability and a different mandate. The hon. Gentleman is absolutely right: if a peacekeeping force does not receive a minimum degree of co-operation, to withdraw is in no way a humiliation; it is a recognition that those we are trying to help refuse to provide the co-operation that is essential to the UN doing its job.

Mr. Max Madden: Given the terrible inevitability of this tragedy, what excuse can be left for denying arms to Bosnian Government forces to defend their people and territory from external Serbian aggression? Will the Foreign Secretary confirm what I understood him to say today—that Her Majesty's Government will support a lifting of the arms embargo, but that that rests with the Bosnian Government formally requesting a withdrawal of the UN protection force?

Mr. Rifkind: Her Majesty's Government continue to believe that the lifting of the embargo would be foolish and is unwise, and we do not propose to support such a proposal. I was referring to the statement of fact, that the Bosnian Government have said that they would rather that the UN remained in Bosnia than that the embargo should be raised and the UN withdraw. That remains the choice that is available to them. I can see no circumstances in which it would be appropriate for the UN to remain in Bosnia if the UN was authorising the supply of weapons to one side in this war.

Mr. John Gunnell: With the benefit of seven weeks' hindsight, does the Foreign Secretary not agree that the hostage crisis and the safe areas crisis are part of a pattern of pressure from the Bosnian Serbs to bring about withdrawal? In those circumstances, are not the suggestions of withdrawal from hon. Members on both sides of the House music to the ears of Bosnian Serbs, and would not a withdrawal lose much of the benefit of which the Foreign Secretary has spoken? Would it not mean just the prolonging of life, not the saving of life, and would it not be the biggest blot on the 50-year history of the UN?

Mr. Rifkind: I agree with the hon. Gentleman, but both he and I must acknowledge that the circumstances might arise that would make withdrawal inevitable. We cannot say that the benefits are of such an order that we can justify

the continuation of British and other UN troops in Bosnia, regardless of the threat to them, of the loss of life that they might incur, and of other such factors, so it must be a balanced judgment. At this moment, we still conclude that the benefits of their presence outweigh the disadvantages, but that argument becomes increasingly difficult to sustain if we see developments of the sort that have arisen in recent times.

Dr. Norman A. Godman: What is the Foreign Secretary's view of the growing campaign, led by Senator Robert Dole, which seeks to end American support for the arms embargo on the Bosnian Government? Is the right hon. and learned Gentleman entirely dismissive of the growing belief that a powerful Congress could force such an initiative on a President who is not known for his decisiveness?

Mr. Rifkind: It may not be irrelevant that the sort of views that Mr. Dole is reported as holding were held by many in the American Administration before they took office, but, faced with the realities of the circumstances in Bosnia, and having been required to carry out analysis as to the likely consequences of lifting the embargo, the United States Administration, including President Clinton, have come to the unequivocal view that the lifting of the embargo and the withdrawal of UNPROFOR would be an extremely foolish initiative, and should not be supported.

Mr. Tony Marlow: rose—

Mr. David Tredinnick: rose—

Madam Speaker: Order. Mr. Tredinnick, do I understand that you heard the Secretary of State's statement but left the Chamber for some 20 minutes during questioning?

Mr. Tredinnick: That is correct, Madam Speaker.

Madam Speaker: In that case, I do not know how I can call you to ask a question, because you do not know whether your question has already been answered; therefore, to put it might be an abuse of the House's time. Does the same apply to you, Mr. Marlow?

Mr. Marlow: I was out of the Chamber for three minutes, Madam Speaker, but I was here for the whole of the rest of the statement.

Madam Speaker: In that case, I call the hon. Member to put a question to the Foreign Secretary.

Mr. Marlow: Is it not the case that, as long as they are having a worthwhile effect and the risks are tolerable, Her Majesty's forces are, for several and various reasons, enthusiastic to remain in Bosnia?

Mr. Rifkind: Yes, I believe that to be the case. Certainly, on each of the five occasions when I have been in Bosnia and met members of our armed forces serving there, I have noted considerable enthusiasm for the work that is being done, because they can see the benefits to the people of Bosnia whom they are trying to help. Of course, occasionally, when they are in a location where they cannot help and are being prevented from distributing aid or escorting convoys, there is some frustration. But throughout Bosnia they believe, and rightly so, that the work being done is of enormous importance, and is directly contributing to the saving of life and other objectives of that kind.

Points of Order

Mr. Tony Banks: On a point of order, Madam Speaker. I do not know what plans you have for the weekend but if you are staying in your official residence, I fear that your peace will be sorely disturbed by a rave party that is being organised and is advertised in the current edition of Time Out in county hall. Given that the House has taken a decision about illegal rave parties, could you make inquiries to ensure that the Japanese owners of county hall do not proceed with that rave party? It would be an insult to the House and it could result in severe damage to county hall. Will you please make some inquiries and get it stopped?

Madam Speaker: I shall certainly give no such commitment to the hon. Gentleman, but I can tell him that I have been disturbed before, whether by rave parties I am not certain, by the activities at county hall.

Mr. Peter Luff: On a point of order, Madam Speaker. I would appreciate your guidance on some remarks in the Chamber yesterday evening during the debate on rail privatisation. During my speech, I drew attention to the poor attendance on the Liberal Benches for the debate on a motion that the Liberal Democrats had inspired, and I mentioned their failure to seek to catch your eye in that debate. A Liberal Member intervened and said:
in a three-hour debate such as today's, we are not entitled to more than one speech at the beginning and one at the end. We could not intervene even if we wished to do so."—[Official Report, 11 July 1995; Vol.263, c.787.]

I would appreciate your clarification, Madam Speaker, that while they are entitled to open and close their debate, they are perfectly free to catch your eye, as five successive Conservative Back-Bench Members did yesterday. Is not the real reason for their absence that they were just not interested in the debate, and does that not show an appalling lack of gratitude for your championing of the rights of Back-Bench Members?

Madam Speaker: All Members know that, if they wish to intervene at any time on someone else's speech, it is for the Member who has the floor to decide whether to give way. Quite a number of Members wished to speak in both the debates that were sponsored yesterday by the Liberal Democrats.
Perhaps we might get on. I have an inordinately long list of Members who wish to speak in the debate today, and I shall have to limit speeches by Back Benchers to 10 minutes.

Mr. Luff: Further to that point of order, Madam Speaker.

Madam Speaker: Order. It was not a point of order for the Chair. We have enough business without petty points of order from all parts of the House. We have business to conduct

BILL PRESENTED

FAIR EMPLOYMENT (DUTY ON NORTHERN IRELAND DEPARTMENTS)

Mr. Michael Connarty presented a Bill to make it a duty of every Northern Ireland Department to promote equality of opportunity: And the same was read the First time; and ordered to be read a Second time upon 14 July, and to be printed. [Bill 163.]

Youth Service

Mr. Peter Kilfoyle: I beg to move,
That leave be given to bring in a Bill to establish the Youth Service on a statutory basis.
I seek leave to bring in the Bill in the full knowledge that hon. Members in all parts of the House have, over a long time, sought to bring in such a measure to establish the youth service in such a way. The reason seems self-evident. It is that the youth service is an extremely cost-effective way to deal with the many problems that young people face.
That great watershed, the Education Act 1944, set in motion a train that was reinforced by a number of reports commissioned by the Government. They were the McNair report, the Jackson report and the Fletcher report. Interestingly, when we reached about 1957, the Albemarle committee was set up in response, ironically enough, to the Notting Hill riots. Its work added substance to a national consensus towards establishing the youth service on a statutory basis.
Sadly, in recent years the youth service has shown a marked decline. I would argue that Government action has subverted its role. It is also interesting that the last time that there appeared to be a major Government interest in youth service provision was after the 1981 riots. I hope that it will not take another round of riots before we interest the Government again in the state of the youth service and the lack of resources it faces.
The youth service most certainly faces a lack of resources. I mentioned that it was a cost-effective service. The cost works out at roughly £10 per annum per youngster who uses it. More than 5 million people use the youth service. Those 5 million young people who are actively in contact with the service are serviced by only 6,000 full-time youth workers in England, Scotland and Wales combined. They are assisted by thousands of part-timers, and more than 2 million volunteers who give of their time and energy. Those people obviously recognise the value of the work that is done, not only in the local government sector but— the vast majority—in the voluntary sector.
If nothing else, both the voluntary and the statutory sectors recognise the community of interest they have in having the youth service placed on a statutory basis. There are now fewer full-time youth workers than in 1978. The voluntary sector has suffered in the same way in terms of Government cuts. NABC-Clubs for Young People, a charity, has reported that its funding from central Government has fallen by 40 per cent. Its funding from local government has fallen by 10 per cent.
The reason is not too hard to divine. As the youth service is not on a statutory basis, when Government cuts are forced through in education throughout the land, it is always one of the first services to suffer. I would argue that that is untenable, given the situation our young people face today.
I remind the House that 750,000 young people between the ages of 16 and 24 are outside work, outside education, outside training, outside benefits and outside Government statistics. Those 750,000 people are our own disappeared, disengaged and alienated section of the population. If that does not trigger a response from Members of Parliament and Conservative Members in particular, they should remember that, at the last general election, 2.5 million first-time voters—the self-same young people—did not bother to exercise the franchise. That was almost 47 per cent. of the total.
We talk about the alienation of our young people from the political process. It is not too hard to see why they are alienated, given that they are in a changing world, facing different problems from those that the vast majority of hon. Members on both sides of the House knew when they were young.
Let us think back to our own years in that age group. The majority of people in the House were in that age group in the 1950s, 1960s and 1970s. In those days, there was open access to education. One could look for a job of whatever sort. They were the halcyon days of apprenticeships for huge numbers of our young people. They were days when people felt engaged. They had hopes and aspirations that were achievable.
That has sadly changed. A whole group of people are shown in survey after survey to have no inclination towards what we would call orthodox society. They are turning their backs on it, for the simple reason that they perceive that we have turned our backs on them.
There is one vital difference between the experiences that we all had and those of young people today. They do not have recognisable rites of passage or know that there is a flow to their lives with regular markers that they can follow, such as going into the work force as an apprentice and getting qualified, having access to education, knowing that at the end of it one can get a job or access to something as simple as benefits. Many of our young people—about 160,000 16 and 17-year-olds alone—have been taken completely out of the benefits net.
One of the few agencies that is actively involved with engaging young people in a debate about their interests and future is the youth service. It deserves all the support and encouragement we can give it. We have to say to young people, even if it is by proxy through support for a statutory basis to the youth service, that we are concerned about delivering to them. After all, they are our future. We only steward the country for their generation and for generations to come. Our stewardship is failing them badly.

Question put and agreed to.

Bill ordered to be brought in by Mr. Peter Kilfoyle, Mr. Greg Pope, Mr. Alun Michael, Mrs. Jane Kennedy, Mr. John Heppell, Mr. David Jamieson, Ms Ann Coffey, Mr. Keith Vaz, Mr. Kevin Hughes, Mr. David Hanson, Mr. Tony Lloyd and Mr. Mike Hall.

YOUTH SERVICE

Mr. Kilfoyle accordingly presented a Bill to establish the Youth Service on a statutory basis: And the same was read the First time; and ordered to be read a Second time upon Friday 14 July, and to be printed. [Bill 164.]

The Economy

[Relevant document: The Minutes of Evidence taken before the Treasury and Civil Service Committee on Wednesday 5th July and Thursday 6th July (House of Commons Papers Nos. 650-ii and iii.]

Mr. Deputy Speaker (Sir Geoffrey Lofthouse): I have to inform the House that Madam Speaker has selected the amendment standing in the name of the Leader of the Opposition.

The Chancellor of the Exchequer (Mr. Kenneth Clarke): I beg to move,
That this House welcomes the publication of the Government's latest forecast, which shows growth continuing at a steady and sustainable rate, inflation remaining low, exports rising and Government borrowing falling; and recognises that this favourable outlook for the economy is a result of the Government's firm commitment to the healthy and sustainable recovery of a modern and competitive industrial economy.
On Monday, Welsh Labour and Liberal Members failed to turn up at Welsh Question Time. I can only assume that they could not think of anything that they wished to say or ask. I am rather surprised that the hon. Member for Dunfermline, East (Mr. Brown) has turned up this afternoon, because he can never think of anything to say that resembles an economic policy. In fact, he comes to debates only when he has to. Once a year at the Budget, and once a year for the summer economic forecast, he hears me describe the progress of the recovery and I set out the encouraging framework for the year ahead. The hon. Gentleman gets up, tells us a few jokes, gives us a few grumbles and platitudes and then he is away again.
All the parliamentary days that the Opposition have allocated to them during the year are problems for the Labour party. It has to cast around for subjects that it wishes to raise. Never once in my time as Chancellor of the Exchequer has it asked for a debate on the British economy. This is a debating Chamber, but so far I have had two years of debating with a tartan Trappist monk.
Why can that be? Why has the hon. Gentleman suddenly become such a diffident shadow Chancellor? The summer forecasts, which we are debating because they are statutorily produced at this time of year, show why. They show that the British economy is doing well and that it will carry on doing well. Anything that is good news for Britain is very bad news for the Labour party.
With every quarter that goes by, this country creates more wealth and more jobs and wins more export markets. The day steadily gets nearer when most people will appreciate from their daily lives that this healthy recovery is delivering rising living standards, more secure employment and more secure family finances.
How can the hon. Gentleman make a speech as shadow Chancellor when he cannot even say whether he agrees with me on interest rates? How can he face the House when he does not have an inflation target? How can he criticise the public finances when he will not say whether public borrowing is too high or too low? He only sets himself a borrowing target that is about as rubbery as an elastic band.

Mr. Alan Milburn: Will the Chancellor give way?

Mr. Clarke: It is a little early. I usually give way frequently and shall do so in due course if Mr. Deputy Speaker allows it.

Mr. Gordon Brown: On the precise matter of the borrowing target, given that the Prime Minister said in 1988 that he would balance the Budget every year, will the Chancellor tell us the first year when he will be able to balance the Budget—is it this century or the next?

Mr. Clarke: There is a forecast which shows that we are well on course to balance in the medium term. Recalling the Red Book, I think that we show balance in about 1998–99, or something of that kind. We are certainly on course towards balance in the medium term.

Mr. Brown: rose—

Mr. Clarke: I shall give way again in a moment. In the two years in which the hon. Gentleman has failed to raise the subject of the British economy in the House, he has seen us cut the forecast borrowing requirement, from £50 billion when I took office, to £23.5 billion next year. We have halved it. We are reducing public borrowing and controlling public spending despite all the hon. Gentleman's votes against us. We are well on course to balance in the medium term.

Mr. Brown: Given that the Government have broken all their promises on tax and are now breaking their promises on spending, will the Chancellor confirm that he is breaking the promise made on the balanced Budget? The Prime Minister said that the Budget would balance every year. Will the Chancellor tell us in which year the Budget will balance, and confirm that in 1998–99 there is a deficit of £5 billion in the Budget forecast and that he is wrong?

Mr. Clarke: It is my recollection that the Government's policy—in contrast to the Opposition, who have not had one—is to move towards balance in the medium term. That is all I can recall. I do not recall the 1988 quotation and I do not rely on the hon. Gentleman's recollection of it. We have always made it clear that we believe in balancing the public finances over the medium term. It has always seemed to me obvious that public finances go into deficit in times of recession and recover at the top of the cycle. We are on course for that. Indeed, we have been controlling public borrowing very effectively for the past two years in the teeth of the votes and opposition of the hon. Member for Dunfermline, East.

Mr. Milburn: Will the Chancellor give way?

Mr. Clarke: No, I must press on to the summer economic forecast, which is what we are debating and which the hon. Member for Dunfermline, East must have forced himself to read. No doubt he read it through tears and while concentrating ground his teeth, because the summer economic forecast shows that 1994 was an excellent year for the British economy. Output grew by around 4 per cent., which was faster than in any other major European economy; inflation had its best run since the early 1960s; exports grew by more than 8 per cent.; and unemployment fell by more than a third of a million in 1994 alone.
The combination of healthy growth, low inflation, strong exports, rising incomes and employment and a falling budget deficit is set, as the forecast shows, to continue in the years ahead. These are the best economic prospects for future growth and prosperity that I have seen in my career in politics.
Partly due to the policy measures that I have put in place, growth has slowed to a more sustainable rate this year. That is deliberate and desirable. The British people want greater economic security and they want to be sure that this time growth will last. The Government are working hard to deliver an economic recovery on which the public can rely—[Interruption.] I shall return to the amendment signed by the hon. Member for Bolsover (Mr. Skinner) and his economic policy in a moment. I was delighted to see it on the Order Paper and I shall give it its fair measure of attention when I get there.
The hon. Member for Bolsover has far more by way of clear economic policy than members of the shadow Front Bench. The contrast between the two is interesting and enlightening. Although it was not called, I propose to speak to the hon. Gentleman's amendment if I can do so and remain in order.

Mr. Tony Marlow: rose—

Hon. Members: Give way to him.

Mr. Clarke: I shall give way to the hon. Gentleman— my hon. Friend—in a moment. Surrounded by a range of opinions on this subject, the Government are delivering a healthy economic recovery, which will not be derailed by inflation, as it so regularly has been in the past.

Mr. Marlow: My right hon. and learned Friend knows that the list of wonderful and desirable things he is talking about could well be affected by whether at some stage the United Kingdom joins the single currency. There was a vote last week in the Conservative party and 89 of his colleagues signified their support for a platform of no single currency. Does not that mean that there is no possibility in the near future that a Conservative Government could ever seek to put a single currency before the British people? If so, would not it be wise to advise the Europeans that there is not going to be a single currency in Britain? [Interruption.]

Mr. Deputy Speaker: Order. Before the Chancellor answers, the House must settle down. I remind hon. Members that interventions are supposed to be brief and to the point.

Mr. Clarke: I shall stick to the summer economic forecast. We have come here to debate the summer economic forecast, yet those on the Opposition Front Bench have nothing to say, Opposition Back Benchers wish to put forward a very socialist programme and my hon. Friend the Member for Northampton, North (Mr. Marlow) brings up one subject, regardless of what we are debating, on each and every occasion. Judgments about the single currency will be made in the interests of the British economy and in the best judgment of the House if and when the issue arises. At the moment we have a strong, steady recovery, which must be sustained.
The Treasury summer economic forecast shows that we remain on course to deliver sustainable growth. There is no need to react too strongly to the recent slowdown in activity. The reason why I am confident that this is merely a change of pace on a continuing running recovery is that the fundamentals of the economy are now in such sound shape. We expect the economy to grow by around 3 per cent. this year and by 2¾ per cent. next year. That growth will continue to be led by exports, supported by business investment. We expect the current account balance to continue to narrow from £2 billion in 1995 to £1 billion in 1996.
One important feature of the recovery has been that inflation has stayed low as the recovery has matured. Underlying inflation has now been below 3 per cent. for the past 20 months. That is the best performance on inflation that this country has seen since 1961. We expect underlying inflation to rise temporarily to around 3 per cent. by the end of this year, as some of the effects of the recent depreciation of sterling and the worldwide increase in commodity prices feed through into the price change. We then expect inflation to fall back to 2½ per cent. by the end of 1996.
The forecast also shows that Government borrowing is on a clear downward path. We expect the public sector borrowing requirement to have halved between 1993–94 and 1995–96 and to fall to £16 billion—just 2 per cent. of gross domestic product—in 1996–97.

Mr. Malcolm Bruce: rose—

Mr. Clarke: Britain's budget deficit is falling faster than that of any other major European country.

Several hon. Members: rose—

Mr. Clarke: I think that the hon. Member for Gordon (Mr. Bruce) was first

Mr. Bruce: I appreciate the fact that the Chancellor wished to finish that point. Does he believe that the forecast of a public sector borrowing requirement of £16 billion for next year would be a favourable background against which to cut taxes, or that he should be continuing to fulfil the golden rule of achieving a balanced budget?

Mr. Clarke: I have always refused to set a figure at which we would cut taxes and a figure at which we would increase them. Budget judgments are far more complex than that. However, it is absolutely essential that public sector borrowing is on course to achieve the balance over the medium term, which is the Government's clear target. Other than that, it is not as straightforward as the hon. Gentleman states, or merely a matter of saying that the PSBR is a particular figure this year and that taxes go up or down.

Mr. Milburn: Will the Chancellor explain why the summer forecast has revised the PSBR upwards from £21 billion to £23 billion? Will he answer the question asked by my hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor: on which date does he expect there to be a balanced budget?

Mr. Clarke: I have explained to the Treasury and Civil Service Committee why we have revised the figure up slightly. The tax take is somewhat lower than we expected for a variety of reasons, including our success with inflation. When wage inflation and other inflation is kept


down, the tax take is reduced. It is an irony that, on the margins, low inflation is bad for the PSBR. Our taxes are affected by a low level of inflation, but we set the spending budgets of the Departments in cash so that they spend up to the cash figure set on higher estimates of inflation. That is why we have changed the figure.

Mr. Milburn: What about the target?

Mr. Clarke: The target is to move towards balance over the medium term. I do not believe that, some time in 1988, we made a different promise. I seriously doubt that, but I shall check.

Mr. Gordon Brown: On balancing the budget and tax cuts, will the right hon. and learned Gentleman confirm the following statement in the Conservative party economic brief for this debate? It states:
The Prime Minister has announced that it is his objective to reduce capital and inheritance taxes, and if possible, abolish them altogether.
Is it the Government's policy to abolish capital gains tax and inheritance tax at a cost of £3 billion?

Mr. Clarke: I heard the Prime Minister last give that long-term objective in a recent speech. In the longer term, I know that the Prime Minister believes that it should be reasonable to get rid of capital gains tax and inheritance tax as well. Inheritance tax is extremely uneven in the way that it falls. Capital gains tax in this country bears quite heavily on some forms of investment, but the Prime Minister has given no sort of commitment about when we might achieve such an ambitious objective. [Interruption.] I heard the speech, unlike the hon. Member for Dunfermline, East. The Prime Minister set out those objectives as a long-term aim for the Conservative party.

Mr. Brown: It is becoming very revealing that the Prime Minister is announcing the Chancellor's decisions in advance of the Chancellor, but will the right hon. and learned Gentleman further confirm that it is now the Government's policy to tax executive share options as income? Having resisted it in three separate Budget statements, but given that it is now being supported by the Tory members of the Employment Select Committee and—I understand—by the Deputy Prime Minister, will the right hon. and learned Gentleman admit that he has been wrong and that it is now the Government's policy to tax executive share options as income and get millions of pounds into the Exchequer as a result?

Mr. Clarke: For a shadow spokesman who has not got a tax policy and cannot even say whether he thinks that taxes are too high or too low, the hon. Gentleman really must not mess about with his press cuttings in that way, trying to find interventions to make in a debate such as this. On share options, he must wait for the Greenbury committee report. [Interruption.] It was this Government who invited the setting up of the Greenbury committee and this Government who invited it to make recommendations. At the right time, we shall respond to Greenbury. Today, we are talking about a summer economic forecast, about which, for all the reasons that I have just been setting out, the hon. Gentleman does not want to talk. He is trying to change the subject from the British economy.

Several hon. Members: rose—

Mr. Clarke: No, I am not giving way.

Mr. Brown: rose—

Mr. Clarke: I will of course give way to the Opposition Front-Bench spokesman, but not for faffing about trying to get soundbites out of this morning's newspapers. I would like him eventually to address the strong and healthy economic recovery on which he has no comment and for which he has no alternative policy.

Mr. Brown: It appears that the Government's tax policy has been handed over, not only from the Chancellor to the Prime Minister, but to the Greenbury committee. Does the right hon. and learned Gentleman support the principle of taxing executive share options as income? Has he now changed his mind?

Mr. Clarke: The Government are a low-taxation Government. We believe that the economy is more efficient as a low-taxation economy. We have already introduced the lowest corporate taxes in the world, we have a long-term aim of tackling inheritance tax and capital gains tax, we have committed ourselves to considering the Greenbury committee's response and everybody knows that we shall continue to reduce taxation as and when we can afford it and when it is in the best interests of the economy, which is in stark contrast to the total silence on the subject from the hon. Gentleman.

Mr. Doug Henderson: Will the Chancellor give way?

Mr. Clarke: I have given way far too often. I shall be criticised shortly for having given way too much.

Sir Michael Grylls: Will my right hon. and learned Friend give way?

Mr. Clarke: I shall in a moment. This debate is becoming a dialogue with a man so unwilling to give a speech on the subject before us that he is praying for 10 o'clock tonight and trying to find other things to talk about.
I have just described an extremely healthy economy. Why are we having this debate, except for an opportunity for the hon. Member for Dunfermline, East to try to follow up his morning's reading of the newspapers? One of the curious complaints that some people make about this recovery is that it is too virtuous. They say that, because it is led by manufacturing and exports, the British people have not felt any immediate impact on their spending pattern, and they say that because it is free of inflation, people with heavy debts are not seeing their debts eroded by a fall in the value of the pound.
All that tedious political chat about the feel-good factor at the end of last year has not made anybody believe the sort of rubbish that I have just been describing. The well-being of the people depends on wealth being created by a successful and competitive industrial economy. Secure prosperity cannot be created for families by short-term fiscal gimmicks or by letting prices and incomes rip. First, we must allow the economy to create the wealth and then the economy will distribute it. It is a virtuous recovery and virtue brings its rewards in confidence, security and prosperity for people once they are satisfied that the Government will deliver sustained performance.
The strength of the British economy at the moment has not come about by chance. We now have the potential to enjoy the elusive goal of sustained, low-inflation growth because the Government have followed a determined and purposeful path. We have pursued the long-term interests of British industry and therefore of the British people.
The decisions that we have taken are now beginning to deliver real benefits to more and more people. Living standards are forecast to grow by £5 a week for households on average this year, and we forecast that they will rise by rather more than that the following year. Sticking to the policies that have pulled us out of recession can now ensure that living standards will rise not only this year and next year but the year after that and the year after that, and, I trust, for many years to come. That is economic security of the best kind. That is what families, pensioners, home owners, business men and everybody else in Britain today want.
Right hon. and hon. Members have the opportunity today to debate the latest Treasury forecast, and the excellent prospects for the economy and for our people, who expect to benefit from it. But of course forecasting is difficult, and the Government do not claim a monopoly of wisdom in that activity.
The hon. Member for Dunfermline, East used to come to the House with different forecasts of his own. Hon. Members will remember the unemployment forecast that he made in the House following the March 1963 Budget—[HON. MEMBERS: "When?"] I mean, the 1993 Budget. The hon. Gentleman must wish that it had been so long ago, but it was only two years ago that he said:
I make one Budget forecast—that after the Budget, unemployment will rise this month, next month and for months afterwards."—[Official Report, 17 March 1993; Vol. 221, c. 289.]
What happened? Unemployment fell that month and the next month, and it carried on falling for months afterwards. It has fallen by more than 600,000 since the hon. Gentleman made that disastrous forecast on behalf of the shadow Treasury team.
It is not fair to say that the hon. Gentleman is never cheerful. He used to smile a little when giving his very gloomy forecasts of disaster for the British economy. In September 1993, even more recently, he said that the balance of payments deficit would worsen over the next two years. What happened? The balance of payments improved; export growth outstripped imports.
The shadow Chancellor can make extremely cheerful forecasts. He was most optimistic about the economic prospects for Mexico. Only last September, in a speech at the National Film Theatre—a suitable setting—he singled out Mexico as a country that had
pursued the right kind of economic policies".
Only three months later the peso collapsed, the economy went into crisis and the International Monetary Fund was called in to stump up the biggest loan in its history. Perhaps the Mexicans, like the British, appreciate today's silence, the absence of forecasts and of any serious economic commentary by the hon. Gentleman.
However, the hon. Member for Dunfermline, East is capable of being clear about some things. In September 1994, he entirely dismissed his political party's principles and past. He said:

The Old Labour Language—tax, spend and borrow, nationalisation, state planning, isolation, full-time jobs for life for men while women stay at home—are equally inappropriate to the demands of the future as they were to the needs of the past".
So much for the 1983 manifesto, on which the hon. Gentleman and the present leader of the Labour party were first elected to the House.
New Labour language is all platitudes and gobbledegook, and it is no longer I alone who says that. On the Order Paper there is an alternative amendment, tabled by the right hon. Member for Chesterfield (Mr. Benn) and 15 other Labour Members. They have set out an alternative Labour party economic policy. [Interruption.] I am sure that that amendment can be spoken to later within the rules of order. It talks about the
gap between rich and poor …and the damage being done …under capitalism".
It says that we are
controlled by market forces which transfer power from the electors and their governments to unaccountable bankers and speculators",
and
calls for … the maintenance of universal benefits
at a dignified level, and
reforms to restore the rights of local authorities and trade unionists and to liberate the people"—

Mr. Deputy Speaker: Order. That amendment is not the amendment that we are to debate.

Mr. Clarke: I accept your judgment, Mr. Deputy Speaker, but that amendment has a lot more content than the one that we shall debate.

Mr. Tony Benn: rose—

Mr. Clarke: I shall give way in a moment— [Interruption.] I usually describe Labour Members in the House as sitting in baffled silence like stuffed ducks behind the hon. Member for Dunfermline, East, but now some of the ducks are quacking, and they are setting off in different directions.
I shall give way to the right hon. Member for Chesterfield; he and I are conviction politicians in our different ways. Labour Back Benchers and I agree on one thing: new Labour is a hollow sham—empty, vacuous and devoid of any principle or purpose. Hon. Members on both sides of the House want to hear no more lists of strategies and no more endogenous growth theory. They wish to know what is the economic policy of a party that wants to form a Government.

Mr. Benn: rose—

Mr. Clarke: I give way to the right hon. Gentleman, with his distinctive views on the matter.

Mr. Benn: If the Chancellor of the Exchequer reads the book that Harold Macmillan published in 1938, he will find that Macmillan called for a planned economy to deal with unemployment. It is a sign of the change in the Tory party that it should have abandoned some of those principles that drew it in with the Labour party behind the idea of full employment, a national health service and a huge house-building programme after the war. The Chancellor should look at his own past and find out how far he has moved from it.

Mr. Clarke: I have read "The Middle Way" by Harold Macmillan, and I know that what the right hon.


Gentleman says about it is true. But between 1938 and 1995, the Conservative party has evolved its policies. At the moment, a modern industrial economy is best managed as we are managing it, producing growth, falling unemployment, rising employment and low inflation.
The right hon. Gentleman's party has also evolved since 1938, but not in the same way. He would not espouse all the positions held by the Labour party in 1938, but at least he has a core of conviction and principle behind his policies. He saw those policies evolve all the way to the late 1980s, when suddenly they stopped. The people elected with him on the 1983 manifesto now spend their time denouncing those principles to academic audiences. The right hon. Gentleman and I agree that what is before us now is a public relations creation with absolutely no content.

Mr. Nicholas Budgen: Will my right hon. and learned Friend give way?

Mr. Clarke: No, I shall press on for the moment, before I am in danger of being brought back to the single European currency. I do not believe that the hon. Member for Dunfermline, East has ever expressed any views on that, either, but he may have some; there may be more hope for him there than I thought.
The hon. Member for Dunfermline, East knows perfectly well what my questions to him are. Are interest rates too high or too low? Is the Government's inflation target too high or too low? Is public spending too high or too low? Are public borrowing and taxation too high or too low? Those are my questions, and we cannot have a serious debate with such a formidable Opposition unless they answer them. Until the hon. Gentleman can answer any of those questions, his party has no official policy on the economy and is not fit to be regarded as an alternative Government.
It may help the hon. Gentleman if I set out some of the basic principles behind the Government's economic policy, upon which the recovery so far has been based. First, we are the only party in the House that believes in the economic benefits of being a low-taxation economy. We also know that low taxation depends on firm control of public spending and borrowing. In my two Budgets, public spending projections have been reduced by about £45 billion, and as a result the budget deficits are on a clear downward path.
When we can afford it and when the economic conditions are right, we shall return to our tax-cutting agenda. The hon. Member for Dunfermline, East has no right to criticise our tax history when he opposed all the spending reductions that I have described.
Secondly, we believe that firm control of public borrowing is essential because public borrowing is actually taxation deferred. Under the Labour Government, the public sector borrowing requirement reached 9.4 per cent. of gross domestic product, and averaged almost 7 per cent. of GDP every year between 1974 and 1979. Since 1979, the PSBR has averaged 2.5 per cent. of GDP and, as I said, it remains back on course to move back towards balance over the medium term.
Thirdly, low inflation is necessary for growth to be sustained. Last week, the Labour leader made a speech marking the 50th anniversary of the Attlee Government.

Today I shall make a brief reference to inflation, to mark the 20th anniversary of the time when inflation reached 26.9 per cent. under the last Labour Government.
The hon. Member for Dunfermline, East claims to be committed to low inflation, and says that a Labour Government would set an inflation target—he simply is not minded to say what that target is. He refuses to say whether he agrees with the Government's inflation target. I write to him—he will not speak to me—but he has still not replied to my letters of 12 May and 14 June, which asked him for his views on interest rates and inflation.
The fact is that the hon. Gentleman has nothing to say at all on the substance of monetary policy. He has no view on inflation, so he has no view on interest rates. I cannot recall any shadow Chancellor expressing no opinion on interest rates. That is quite an important subject, but I have not heard him express an opinion upon it for at least six months.
I am anxious to make our monetary framework and anti-inflationary policy one of the most open and transparent in the world. The hon. Gentleman is now saying that he agrees with my changes in procedure and openness. His only suggestion is to form a committee to which he will appoint all the members as, he claims, that will somehow reduce the political influence on the Bank of England. I do not quite understand that.
As a result of my changes, the hon. Gentleman now has all the information he requires. He has the minutes of a meeting that I had a few weeks ago, at which I had a difference in judgment with the Governor of the Bank of England. It was a matter of finely balanced judgment. The Governor and I have no difference in aim, and we share a strong personal commitment to making the British economy a low-inflation economy. The Governor and I must weigh the balance between the activity data on one hand and price pressures on the other. The Governor inclined one way; I inclined another. I decided that there would be no interest rate rise that day.
The shadow Chancellor has had weeks to study all the data that were before the Governor and me when we took that decision. He has even been able to read the minutes, see the arguments and read and consider the Governor's advice. He even has the benefit of hindsight, and he can look back now and say what his opinion might have been. Can this aspirant to high Government office say today whether he agrees or disagrees with my decision? The hon. Gentleman may be a slow decision maker, but if he is posing as a would-be Chancellor, he must show that he is capable of making a decision or having an opinion. But he is not capable. The hon. Gentleman does not have a view at all.
Let us hear it. Interest rates—too high or too low? What about my judgment on interest rates? The hon. Gentleman is meant to shadow my decisions. He is meant to say when he agrees with me and criticise me when he does not. He is a tartan Trappist monk with nothing to say on the key features of economic policy.
Most importantly, we believe that businesses, and not Government, create prosperity and jobs. The supply side reforms that the Government have put in place in the past 16 years have transformed the British economy for the better. All those reforms were opposed by the Labour and trade union movement when it held to its old principles.
During the 1980s, Britain moved from the bottom to the top of the international league table for growth. There are now 50 per cent. more active businesses in Britain than in Labour's last year in office. Last year and the year before that, Britain had the fastest-growing major economy in Europe, and this year we look set for a repeat performance.
The hon. Gentleman and his party are still wedded to some old-fashioned approaches that would saddle British business with Government-imposed costs and make it more expensive to create jobs in this country. The minimum wage would cost thousands of jobs and would add billions of pounds to businesses' costs. The social chapter would destroy Britain's reputation—a reputation that matters to us—as the best place in Europe in which to invest and do business in the European single market.
The Government have set out clear objectives for our economic policy. We have an inflation target, a public borrowing target, clear plans for public spending and a longer-term commitment to reduce the basic rate of income tax to 20 per cent. Those are clear and decisive policies that are delivering the goods, and a forecast today shows that the economy is in the best shape for decades.
The British public want an economic recovery which lasts, which is for keeps and on which they can rely to bring rising living standards to them and their families to the end of the decade and beyond. Only modern Conservative economics can deliver that goal, and the summer forecast shows that, between now and the next general election, we can take the message of growth and hope from house to house and town to town in this country. Ours is a clear message, a Conservative message, and a message that is succeeding in making Britain an economic success story again, and I commend it to the House.

Mr. Gordon Brown: I beg to move, To leave out from "House" to the end of the Question and to add instead thereof:
'notes not only the Government's forecasts but the recent White Paper on competitiveness showing Britain lagging behind its major competitors in its preparations for the challenges of the future; regrets that living standards are still falling for millions of people as a result of the biggest tax rises in Britain's history and the recent rise in the costs of being a home owner; deplores the levels of long-term unemployment and youth unemployment still prevalent in Britain today; calls for an end to complacency over the levels of investment in technology, employment, training and skills and a recognition of the importance of higher levels of investment in new employment opportunities and in long term sustainable growth consistent with low inflation; and calls for a fairer Britain, including immediate Government action to tackle the excesses in the boardrooms of the privatised utilities.'.
Let me begin by welcoming the three new members of the Chancellor's Treasury team, and congratulating the Chancellor of the Exchequer on—how should I put it— holding on to his job. He is now confirmed as the Chancellor of the Exchequer; one of the second Secretaries of State.
The starting point of the debate is that the country needs real policy changes to prepare it for the great technological, global and financial changes that were barely mentioned in the Chancellor's speech. To bridge the investment and prosperity gap with our competitors, we need these changes.
First, we need detailed measures for new investment in the economy and for stability, including the new monetary framework that I have set out. Secondly, we need measures to ensure that there is a revolution in skills, with new policies—not just a new Department—for education, training and employment. Thirdly, we need measures to tackle long-term youth unemployment and to encourage a fiscal regime and policy with rewards and incentives that are fair and seen to be fair, and that means tackling many of the abuses in the privatised utilities.
We are faced with those great new challenges, and we are faced also today with unacceptably low levels of investment in the economy. The Government's own competitiveness White Paper said only a few weeks ago that an enormous task was yet to be faced, and there were more reports this morning of difficulty in the housing market and the labour market, and a report that manufacturing output is down yet again.
Given all that, the complacency of the Chancellor's speech—and, indeed, his whole attitude and approach— is breathtaking. It is remarkable that the Conservatives talk to the country about change when they are trying to occupy Labour's ground. They talk of intervention in training and education, and suggest that they will act to stem boardroom pay abuses.
The Chancellor was incapable of bringing anything new to his speech. He did not even have scant recognition of all the implications for his economic policy of his new next-door neighbour at No. 10a Downing street.

Sir Peter Hordern: The hon. Gentleman has mentioned a matter to which he has referred in a number of his sound bites—investment in training and education. That will require more money. Will the hon. Gentleman now say whether that money will be raised through higher taxes or through higher borrowing? If, as is inevitable under all Labour Governments, it is through higher borrowing, in what way will the hon. Gentleman's Government differ from the experiences of every Labour Government since the war—borrowing too much, spending too much and finally collapsing into the arms of the IMF in abject surrender?

Mr. Brown: First, I would stop talking about new initiatives for training and education while cutting the budgets of training and enterprise councils, as the Government have done, in such a way as to downgrade the importance of training. Secondly, I would say yes, we need a statutory framework for training—not the voluntaristic approach adopted by the Government—and yes, I do believe that employers will have to contribute more to the training of the work force if we are to have a successful economy in the future.
The whole theme of the Chancellor's speech—if I heard him correctly—was that we have the best prospects that he has seen in 30 years. He said that we have "excellent prospects—the best in a generation." Tell that to the millions of home owners in the country; tell that to thousands of small business men who are worried about what is happening in the retail market; tell that to the construction industry, which reported only yesterday that it is in its worst position for three years in terms of new orders; tell that even to some members of the Conservative party, such as a well-known Tory fund-raiser who has lent the Tories thousands of pounds.


He has not said that we have the best prospects for 30 years—he has said that conditions are as tough as anything he has experienced in 26 years of business.
If the Chancellor wants to give home owners better prospects, having forced up their bills by 20 per cent. by cutting mortgage tax relief, why does he not agree that on Monday he will withdraw the proposal that will remove help for homeowners on income support when they are unemployed?

Sir Teddy Taylor: I appreciate the brilliant speeches that we have heard, but will the hon. Gentleman give some guidance to the people of Britain who want to know whether it is the basic aim of the Government, and the Opposition as an alternative Government, to seek to rejoin fixed exchange rates? May we have a brief answer to that question from the Government and the Opposition, as it would be of immense value and help to people outside?

Mr. Brown: We have no such proposal. The Government talk about a strong pound, but they should consider what has happened since 1979. Set against the deutschmark, the pound is now worth half what it was in 1979. The Chancellor told the Treasury Select Committee that economic conditions were bound to be reflected in what was likely to happen to the pound over time. It is a sad indictment of Government policy that the pound is now worth half what it was when the Conservative party came to office.
The Chancellor says that we face the best outlook for 30 years and that prospects are the best for a generation. I recall another statement that he made:
We face the best economic outlook that most people of today's working generation have ever faced in their lifetime."—[Official Report, 20 March 1986; Vol. 94, c. 424.]
Today he makes the same claims with the same confidence, complacency and certainty, but when he made it in 1986, it was just before the Conservative party let inflation get out of control and interest rates rise, causing the worst recession for 60 years.
The Chancellor asks whether growth will last, and answers by telling us that this time of all times it will. Does he recall telling the Welsh Conservative party conference:
There is no doubt we are now enjoying quite extraordinary growth. The real question is: will it last?
"Yes," he said, "it can last." That was in 1988, just before the Conservatives drove the economy into recession. He praised, not the current Prime Minister but the work of Lady Thatcher, for all those achievements. Inside a year, that growth was to develop into a recession.
We have heard all the Chancellor's predictions and statements before. They are familiar boasts. The reason why they do not make sense is that the Chancellor and his colleagues have failed to tackle the underlying weakness of the economy.

Mr. Kenneth Clarke: We were enjoying a strong recovery in 1986–88, of a kind that was utterly unprecedented, as it was a recovery from the Labour years. Monetary policy and inflation went wrong in the late 1980s and the whole recovery was brought to an end.
I am now taking interest rate decisions to ensure that this recovery is combined with low inflation and that it lasts. Does the hon. Gentleman agree that monetary policy

is crucial to that? Does that therefore mean that interest rates are crucial? What are his opinions on the interest rate decisions that I have taken in recent weeks?

Mr. Brown: It is because we think that monetary policy is important that we have made proposals for a new approach to monetary policy. Does the Chancellor support, as we do, the creation of a monetary policy committee within the Bank of England? Does he support, as we do, strengthening the Bank of England's advisory function? Does he support opening up the Bank of England to greater scrutiny of the advice that it gives, as many Conservative Members do? I see that the majority of Conservative Back Benchers present in the Chamber are supporters of the right hon. Member for Wokingham (Mr. Redwood), so the Chancellor should listen.
Does the Chancellor support, as we do, widening the scope of the group of independent advisers to the Treasury? Does he support the changes in monetary policy that would make it far more stable and consistent and end the uncertainty that occurs every time he meets the Governor of the Bank of England, which creates an unstable framework for the future of monetary policy?
While he is answering my questions, will he say which is his inflation target: 2.5 per cent.; 3 per cent., which he said is a triumph; or 1 to 4 per cent., which he announces to the public? Or would he, as he said to Conservative Back Benchers, reach 1 to 4 per cent. only on some but not on all occasions? Which is the Government's inflation objective?

Mr. Kenneth Clarke: It is no good the hon. Gentleman appointing a committee of his friends and cronies with the idea that that will tell him what to do about monetary policy. He says that I must make advice from the Bank of England more open. I have made it more open. The hon. Gentleman can read the advice of the Governor of the Bank of England. Were the hon. Gentleman ever Chancellor, he would have to decide whether he agreed with it. My inflation target is 2.5 per cent. or less. I set policy month by month to deliver that target until the end of this Parliament and beyond.
What is the hon. Gentleman's inflation target? He does not have one. His list of procedural changes is vacuous rubbish to try to cover the fact that he has no policy. He has just conceded on the critical policy judgment at the end of the 1980s.

Mr. Brown: The Chancellor has not answered my questions: what is the status of the 1 to 4 per cent. range? What is the status of the paper that he sent to Conservative Back Benchers saying that 1 to 4 per cent. was applicable most of the time but not all the time? What is the status of his statement that 3 per cent. would be a triumph? What is the Governor's advice on whether the Chancellor will meet the inflation target of 2.5 per cent.?

Mr. Kenneth Clarke: The target is 2.5 per cent. or less. As my speech made clear, it is not possible in the real world to hit the same figure month by month, because inevitable variations take place, so setting policy at 2.5 per cent. or less will in practice lead to inflation of between 1 and 4 per cent. The Governor and I agree on pursuing that target, which is set by the Government, and he advises me on monetary decisions that I must take to deliver it. That could not be clearer. It is ridiculous for the hon. Gentleman to make comments based on getting hold of a central office brief, which is perfectly open, and then to


say that that somehow alters the absolutely clear text of the speech that I had made, which the document simply purports to describe.
My inflation target is clear. What is the hon. Gentleman's? What is his current policy? How dare he come here and talk about monetary policy and interest rates when he has not a serious word to say on the subject?

Several hon. Members: rose—

Mr. Brown: I shall deal with interventions from both sides of the Conservative party in a moment.
The Chancellor says that he is setting policy to reach an inflation target of 2.5 per cent. He has refused to answer my question as to what advice the Governor has given him.

Mr. Kenneth Clarke: The hon. Gentleman can read the Governor's advice for himself. Thanks to the changes that I have made, the Governor's opinions on this matter will appear at monthly intervals, but the hon. Gentleman will say nothing in response. He can read the minutes that I have published. [HON. MEMBERS: "Where are they?"] I do not have them with me, but hon. Members can read them. One can take a horse to water but one cannot make it drink. For the guidance of Opposition Members, I have published an accurate account of the Governor's advice. What does the hon. Gentleman do but come along and ask me what it is? He should go away and read it and then tell me whether he agrees with it.

Mr. Brown: The Chancellor will not tell us what the Governor's advice, is because the Governor has said that he will not meet the Chancellor's inflation target of 2.5 per cent. The reason he will not meet his inflation target is because the Chancellor has not addressed the underlying weaknesses of the British economy.

Mr. Budgen: Will the hon. Gentleman explain a little further his proposals for extra committees within the Bank of England? Is he really proposing that there should be some form of independence in the Bank of England, or is that just a bit of window dressing? Does he agree with the Government that, ultimately, any Government must take political responsibility for interest rates and be responsible to the House for them?

Mr. Brown: No, I do not propose independence for the Bank of England. But the demerits of the personalised system of the Chancellor meeting the Governor, which is the basis of setting monetary policy, without strengthening the advice to both the Chancellor and the Governor, has been exposed this afternoon by the Chancellor's failure even to remember what the Governor said to him.

Mr. Kenneth Clarke: Let us have a little clarity and common sense. The hon. Gentleman has just said that he believes that the Governor does not think that we shall hit our target and has implied that he agrees with the Governor. That means, I take it, that he would have put interest rates up.

Mr. Brown: What I said was that, under existing policies, the Chancellor would not meet his target. The reason that I said that he would not make his target—and the Chancellor should not try to misrepresent what I

said—is that the Government have not tackled the underlying weaknesses of the economy, which are the barrier to long-term sustainable growth.
If the Chancellor—[Interruption.] Every time that is mentioned, the Chancellor laughs, but investment in manufacturing is 25 per cent. less than it was in 1989. Investment in the real economy is 10 per cent. less than it was in 1979. The Chancellor says that we are making an excellent recovery from the recession, but investment has increased by only 3 per cent. in the first years of what he calls a recovery, whereas it increased by 30 per cent. in the 1970s and by 20 per cent. in the 1980s.
We have a lower increase in investment out of recession than even in the 1930s. What some countries achieve by way of investment in a recession, we cannot even achieve in this country in a recovery. The failure to tackle the underlying weakness of manufacturing and general investment in the economy is the reason why, every time we expand as an economy, we run into inflationary pressures, we have to increase the amount of imports and interest rates have to be raised; and we are reaching that point at an earlier stage of the economic cycle than previously.
The idea, therefore, that the Government can offer the country the best prospects for 30 years based on a failure even to acknowledge the underlying weaknesses of under-investment in the economy is a myth that will be exposed cruelly as events take their course in the next few years.

Mr. Nigel Forman: rose—

Mr. Peter Ainsworth: rose—

Mr. Brown: I give way to the hon. Member for Carshalton and Wallington (Mr. Forman), after which I shall move on.

Mr. Forman: I seem to remember, having attended several of these debates in which the hon. Gentleman has sought to make these rather vacuous speeches, that his policy rests essentially on increasing public investment in education and training and other forms of human capital. Indeed, the Labour party waxes lyrical about that. The hon. Gentleman goes on to say—he said that last year and he said it recently—that he would finance that by increasing public borrowing. How can he possibly come to the House and claim that he would increase public borrowing without taking a risk on interest rates and the likelihood that, under Labour, interest rates would be higher?

Mr. Brown: It is the Chancellor who has increased the amount of borrowing in his forecasts, from £21 billion to £23 billion—from £12 billion to £15 billion next year— and still tells us that he will achieve tax cuts. I want borrowing to be cut, and the first way to cut borrowing is to cut unemployment in the national economy.
The reason that the Conservatives cannot solve those long-term problems of an economy that generates inflation as it expands and of an economy that requires higher interest rates as it moves forward is that they have not tackled those underlying weaknesses, which require an investment-led recovery. That is what the people of the country need.
Nothing has changed under the Government. Nothing has changed since the Prime Minister said that he had to have his re-election guaranteed by his party. Nothing has changed in the policies for education and training, for manufacturing, for investment and for the infrastructure of the economy. All that has changed is that we have the Prime Minister's announcement of what he calls a reconstruction of personnel in his Government.
It is not a reshuffle. It is not the refreshing of the Cabinet that took place last year, although the two members that he brought in then—the Chief Secretary and the Conservative party chairman—have now gone. It is what he advertised as a reconstruction of his Cabinet—a reconstruction, I suspect, only in the crudest motor trade sense, an attempt to salvage one passable vehicle from the wreckage of two.
What does that reconstruction add up to?

Mr. Quentin Davies: rose—

Mr. Peter Ainsworth: rose—

Mr. Brown: I am not giving way again.
It adds up to a new Minister in charge of presentation, a new Minister in charge of information, a new Minister in charge of competitiveness—and those are only a few of the titles that the deputy Prime Minister has insisted on for himself.
What is that new job of Deputy Prime Minister all about, and what is its connection with the economic policies that the Chancellor must now make? How will the new Deputy Prime Minister define the purpose of his job? What will be his rallying call at the Conservative party conference in October in the new slot that must be taken away from the Chancellor for the Deputy Prime Minister?
Remember that famous conference speech that followed his ascent to the presidency, when he promised that he would intervene and intervene and intervene? When he stands up at Blackpool this year, will he echo that famous speech with a new promise of his purpose more in keeping with his new role, a new pledge to delegates of what he will personally do—interviews before breakfast on the "Today" programme, interviews before lunch on "The World at One", interviews before tea on "PM", interviews before dinner, and get up next morning and start all over again on an interview on the "Today" programme, complaining about bias against the Conservative party by the BBC? In spite of all the new titles that he has, the most important of his new responsibilities is as the Minister for keeping up appearances.
The Deputy Prime Minister is the new man at No. 10a and, to the Chancellor, Downing street looks a bit more crowded this week. We have that great new triumvirate of neighbours in Downing street, at Nos. 10, 10a and 11; the most powerful men in the country forming the new Downing street residents association.
There are some difficulties for the Chancellor and a distinct risk to his position in what is happening at No. 10a. Look at the remit for the work of the new man at No. 10a. He now chairs the Cabinet Ministerial Sub-Committee on Public Sector Pay—it sounds as though that should be the Chancellor's job. He chairs the Civil Service Employers Group—it sounds like the Chancellor's job. He chairs the Senior Civil Service

Group—it sounds like the Chancellor's job. When Professor Peter Hennessy said that the Deputy Prime Minister would reach for the parts that no previous deputy had managed to reach, he presumably meant encroaching on the Chancellor's job at No. 11.

Mr. Peter Butler: On a point of order, Mr. Deputy Speaker. I am as happy as anyone else to enjoy a joke for a minute or two, but may I invite you to consider whether this has anything at all to do with the motion?

Mr. Deputy Speaker: That is a bogus point of order, and the hon. Gentleman knows it. If it had been out of order, it would have been ruled out of order.

Mr. Brown: I am talking about the conduct of economic policy and the way in which it will be managed in future.
I know that the Chancellor did not read works as trivial as the Maastricht treaty, but perhaps he should read the book that was written by the new Deputy Prime Minister entitled "Where There's a Will"—his clearly stated ambitions laid out as early as 1987—for the First Secretary is now doing everything that he signalled in that book.
The new Deputy Prime Minister said in his book that his ambition was to preside over what he now calls a transgovernmental machinery, chaired, naturally, by himself. What are the tasks? The promotion of Britain's strategic wealth-creating interests—it sounds remarkably like the Chancellor's job to me. The flow of incentives— it sounds a bit like the Chancellor's job to me. In his book he then says:
This committee must also deal with another important issue— the tax system.
It sounds remarkably like the Chancellor's job again. What is the Deputy Prime Minister trying to do? It sounds remarkably like the Chancellor's job to me.
Indeed, if the book is pursued, the criticisms of what has gone wrong in the British economy are laid at one door by the Deputy Prime Minister—the door of the Treasury. He says:
The weakness is that there is not sufficient challenge to Treasury judgments",
which may frustrate the strategic industrial objectives of the Government. Therefore one may expect some action in Downing street about that.
Of the Treasury, he says:
What is interesting is how often the Treasury can fail to see the big defect in its conduct of affairs".
Is that not a formula that the Prime Minister has invented for serious conflict—indeed disorder? Already this morning, we had the divergence of opinions on executive pay.
What can we expect during the summer and the autumn? How will things settle down? What can we expect from this new Downing street residents association? Let me draw the Chancellor's attention to some of the problems that his new neighbour is likely to bring; the new hazards that threaten the once respectable residential cul-de-sac and have just been dumped on his neighbourhood.
Is the Chancellor prepared to put up with a neighbour giving loud radio and television interviews at all hours of the day and night? Is he aware of his neighbour's


insatiable ambitions, which he is showing already, for home improvements, with a succession of new extensions at No. 10a encroaching on No. 10 and No. 11?
How will the Chancellor feel when he looks nervously out of his back window each morning and sees yet another unannounced Portakabin, so much so that the Downing street garden is at risk of being so encroached on that there will be standing room only for the press the next time that the Prime Minister resigns as Conservative leader?
How will the Chancellor feel when he walks out, that November day, with his Budget red box and finds his parking space blocked by the Deputy Prime Minister's Jaguar, and his own car cannot come in because the entrance is blocked by the media because the First Secretary is giving yet another interview in front of the cameras?
It is the familiar formula for trouble on the street—the build-up of tensions, noise, pushy and aggressive behaviour, territorial disputes, the long hot summer ahead in Downing street and aggressive men with not enough to do, men whose future employment prospects are bleak, with no long-term stake in society. Even the constant police presence will not provide reassurance. Appeals from senior community leaders, such as the right hon. Member for Old Bexley and Sidcup (Sir E. Heath), Lord Archer or the chairman of the 1922 Committee, will not be able to restore calm. As the Chancellor will discover in Downing street, two's company and three's none. By the autumn, he will become a convert to Labour's new solutions for curbing persistently anti-social neighbours.
I am glad that the Deputy Prime Minister is now in post, because the former President of the Board of Trade was far less complacent and he had a far greater appreciation of what is fundamentally and structurally wrong with the economy. The Chancellor will know that, in his previous works, the Deputy Prime Minister proposed a statutory approach to training—about which I was asked this afternoon—development agencies for England, which the Conservative party brief now criticises; signing the social chapter; new monopolies and merger legislation; and an industrial policy for the country.
The Government cannot implement those policies— even though they are right for the country—because they are so divided, from top to bottom, between right and left, about what must be done that there is paralysis at the centre of Government. They cannot adopt the industrial policy because the right oppose it; they cannot privatise the Post Office because the left oppose it; they cannot reform the City because Lord Hanson has threatened to withdraw his money; and they cannot stop the mad policy to privatise the railways because of the right wing.
People will remember that the big case made in support of the Prime Minister only a few days ago was not that he could lead the country and prepare us for the future, but that he was the only person who could unite the Conservative party. He was the least worst option, as the Minister of State for Transport said when putting his case. The Prime Minister has not introduced any new policies except for the one revealed by the Chancellor this afternoon when he failed to answer properly the question that I put to him.
The Prime Minister issued a manifesto, in that desperate period between wobbly Monday and wobbly Tuesday when he returned from Cannes, which is simply a group of uncosted spending promises. That is what the Conservative party has been reduced to in order to encourage its members to vote for the Prime Minister. The abolition of capital gains tax—one of the Prime Minister's objectives, as stated in a fax to the Evening Standard when it carried an article listing what the Prime Minister believed in—will create £1.6 billion, rising to £3 billion. The Chancellor should know that 50 per cent. of that will go to only 2,000 people in this country. It is a straight handout from people who are poor to people who are very rich.
Another aim of the Prime Minister is the abolition of inheritance tax. The Chancellor will know that, while there is a strong case for raising the threshold, the abolition of inheritance tax will create £1.4 billion, of which 50 per cent. will go to only 2,000 estates in the country. I can well understand that the Prime Minister is embarrassed. At the last election, he promised to do something about inheritance tax, but he never did. He broke his promises not only to the living, but also to the dead; such was the Government's failure to honour their tax promises from the election campaign.
There are other uncosted spending promises, such as the promise of tax relief for home owners—which has been signalled today in the press—and the promise of tax relief for community care. The Conservative party made £11 billion of uncosted spending promises in 11 days— that is £1 billion a day just to secure the Prime Minister's re-election as leader of the Conservative party. That is not a failure of Government; it is a failure of opposition. As the Chancellor prepares for opposition, he will have to learn the importance of not making uncosted spending promises.
The Prime Minister's proposals are targeted: they will target all the wealth on a privileged few. When a choice must be made about spending priorities in this country, it should not be in favour of tax cuts that are geared to the very wealthy, based on the abolition of inheritance tax and capital gains tax. If any Government are to be serious about justice and fairness, they must deal with the problems of education, health and our public services, while providing a proper tax deal for middle and lower income Britain.
The Chancellor must also realise that the case for taxing executive share options as income—the one proposal that the Prime Minister did not mention, but which is apparently favoured by the Deputy Prime Minister— should be accepted now. When everyone else pays income tax on all their income, apart from personal allowances, how can the Chancellor justify top executives in privatised utilities having the privilege of escaping paying income tax on their earnings and simply paying capital gains tax? How can the Chancellor justify the millions of pounds that have been lost to this country through his refusal to implement our policy in the past few years?
The Government have broken their promises on tax and on spending. They have broken all the promises that they made at the last election. The Conservatives said that they were committed to the biggest investment in transport infrastructure in our history; that promise was broken. They promised to invest in the railways, but that promise was broken. They promised to invest in housing, but that


promise was broken. They promised to invest in law and order and environmental protection, but those promises were broken.
The Government promised substantial assistance in the area of heritage, but instead they cut 5 per cent. from the budget. They promised to invest in the railways, but they cut the railway investment budget. They are now having to subsidise the franchise companies, not to improve the rail stock, but in order to make them saleable. The Conservatives have betrayed their promises on tax and spending, and this afternoon they betrayed their promise of a balanced budget.
Despite the Prime Minister's claim in 1988 that the Government would balance the Budget, the Chancellor cannot tell us the year in which he will do that. The Conservatives promised an economic miracle and they did not deliver it. They promised us zero inflation and they failed. They promised that the pound would replace the deutschmark, but that did not happen. They have broken promises everywhere.
The debate puts on record the fact that all the Chancellor's central economic promises have been broken, and the electorate will draw their own conclusions. The Conservatives can talk all they want about what the Prime Minister calls "reconstruction", but the trust that has been thrown away with 16 years of broken promises can never be reconstructed. People will never trust the Conservative party again. After 16 years of broken promises, while other countries move ahead and prepare for the future, the Chancellor must recognise that, along with the devaluation of our currency, we have seen a devaluation of the office of Chancellor and the integrity of the Government. The only way to ensure that there are no more broken promises is for the Government to go, and to go soon.

Several hon. Members: rose—

Mr. Deputy Speaker: Order. Before I call the next hon. Member to speak, I remind the House that Madam Speaker has placed a limit of 10 minutes on all speeches by Back Benchers during the debate.

Sir Peter Lloyd: The speech by the hon. Member for Dunfermline, East (Mr. Brown) contained some very good jokes, but the content was extraordinarily thin. At one stage, it seemed that he was about to relaunch Harold Wilson's white-hot technological revolution, but even that went rather cold.
Time is short and many hon. Members wish to speak in the debate, so I shall confine myself to making only one major point. Many of my hon. Friends and some distinguished commentators have urged the Chancellor to make dramatic cuts in the Budget this autumn. They argue that it is essential to provide an extra stimulus to the economy, which, after a period of impressive growth, has recently begun to show some signs of sluggishness. They also believe that the policy would prove popular with electors, who need to be reminded that the Conservatives are on the electors' side when it comes to their take-home pay.
I do not know how much room for manoeuvre the Chancellor will have in November—I do not suppose that he is sure himself yet. However, I hope that he will view the advice about the sure-fire economic and political

efficacy of tax cutting with the same shrewd scepticism that he displayed some months ago in response to Mr. Eddie George's recommendations that interest rates should rise.
I hope that the Chancellor will find that he can safely reduce some taxes and, if he does, I hope that he will use the opportunity judiciously, and remove impediments to economic growth and job creation. I hope also that he will remedy particular unfairnesses in the system, rather than spread largesse thinly and promiscuously across the board in an attempt to please everyone. But it does not appear that he will have very much scope for tax reductions in the autumn, unless he finds a way of reducing public spending much more thoroughly and speedily than any of his predecessors ever managed to do.
Public sector borrowing is still too high; what is more, it is higher than my right hon. and learned Friend the Chancellor forecast last year. Some of my hon. Friends might point out that that is because tax and other receipts are lower than forecast. Some of that may be due to lower inflation, but clearly there is an argument that economic activity is less than expected and needs some stimulus.
We have, however, had three years of tax increases, and it is easy to under-estimate the novel and tonic effect on the public of not being hit over the head with another round of tax increases. Unemployment continues to fall, and wage increases are in the pipeline. There are also some building society flotation windfalls that will add to consumer purchasing power.
It seems to me that the chief impediment to consumers actually spending more remains a lack of confidence in the future, and I do not believe that that will be alleviated by tax cuts this year. It will certainly not be by tax cuts trumpeted loudly as a spectacular break with the past three years. With the overshoot in public borrowing last year, this year and next year, I fear that any tax cut, large enough for the Chancellor to boast about it, would rightly undermine confidence in the City and abroad in his consistency and good housekeeping, and would leave taxpayers thoroughly unimpressed to boot.
The latter would no doubt willingly put the money in their pockets; they might even spend some of it, but they would certainly assume that it was a tacit admission that the Government had got it wrong again when they raised taxes last year. They would note that the election was getting closer, and they would ask whether it would not have been easier all round not to have hiked up taxes last year just to lower them this year. They would conclude simply that the Government did not know their own mind.
I believe that that conclusion would be confirmed when interest rates had to go up, as they surely would. Higher interest rates would not be good for investment, and the historically low rate of investment is probably our most persistent economic problem and the greatest threat to economic growth in the longer term.
Higher interest rates would not be good for consumer confidence, which has to be fortified if recovery is to continue. Keeping interest rates as low as possible is the one major piece of assistance that the Chancellor can give home owners who are caught in negative equity and first-time buyers who are keen to take advantage of comparatively low house prices. Avoiding higher interest rates is far more use to them than any of the expensive,


ineffectual schemes that are being pressed upon the Treasury. Ill-timed and unjustified tax reductions will do them no service.
The Chancellor is an entertaining and interesting man, but I hope, that when he presents his Budget in November, he will have the courage to be boring. I also hope that his colleagues in government have the nerve and wisdom to support him in that. If he presents a Budget that is consistent with what he said last year and the year before and that is quite clearly not constructed with the next general election in mind, he will do much to sustain the healthy, export-led, low-inflation growth of the economy that we have managed to secure since we were liberated from the ERM. He will also have begun to restore in the public mind the Government's tattered reputation for good economic management, which they will need to recover if they are to win their next election.

Mr. Robert Sheldon: The last time that the Chancellor debated economic matters before the House was 13 December 1994. It is quite disgraceful that we have just two economic debates a year. [Interruption.] It is no use the Chancellor protesting that it is up to the Opposition. We used to have debates on the Budget and the Queen's Speech, the expenditure debate, the Finance Bill debate and the regulator, as well as the summer forecast. All those debates were in Government time, and it is a scandal that we no longer have them.
Not only can we not question the Chancellor and find out his thinking, but we do not have the benefit of understanding what hon. Members have in mind and their views on economic matters. Many newer Members of Parliament have never made a proper economic speech. It is a major scandal, and it has to be put right by next year.
I start with our obsession with the one-club approach. I am sorry that the right hon. Member for Old Bexley and Sidcup (Sir E. Heath) is not here. He used to advocate the need for having rather more weapons at our disposal than the one club that is now a standard feature of economic policy. In the 1960s, we had the one club of the exchange rate. In the 1970s, we had the one club of sterling M3. Now we have the one club of interest rates. It is peculiar that so many of the cleverest people in the Government and the City have tunnel vision, and seem able to concentrate only on one variable at any one time.
In practice, the Chancellor has to balance many claims. Growth, unemployment, the balance of payments, inflation and investment are all important factors. The Bank of England can afford the simplicity of concentrating on one variable, whereas politicians cannot. If the Governor of the Bank of England is proved wrong, he can always say that the position is not yet known. He can say that the jury is out, and that next month will prove him right, or that we will have to wait a few months or even until next year. The jury can stay out until the patient dies, but any Chancellor of the Exchequer has to make a proper decision.
The prime consideration of economic policy cannot be just inflation, inflation, inflation; the prime consideration of any Chancellor of the Exchequer must be growth and the long-term improvement in living standards. Everything else involves the means of bringing that about.

Any Chancellor is right in asserting his vision of the requirements of economic policy. In any standoff with the Bank of England, he needs to assert the concern for the accountability of Government, in which we all have an interest.
It is a pity that the Chancellor's meetings with the Bank of England are not copied in meetings with industry. Why does he give such priority to the Bank of England and the view of bankers, without being able to compensate for that view with those of the people who are actually producing the goods and the real wealth of our economy?
Our prime economic task is to rebuild our industrial capital and our manufacturing industry, so much of which was shamefully destroyed in the first dogma-driven years of the Thatcher Administration. The most important means to long-term growth are investment in manufacturing, education and training, which has been put out repeatedly by my hon. Friend the Member for Dunfermline, East (Mr. Brown).
There are differing time lags involved. Investment in plant and machinery is necessary to improve the efficiency and capacity of our industry. That can be encouraged within the lifetime of a Parliament. Training can be achieved on a similar time scale if the will is there. Education, however, is for the longer term.
The need for training and vocational education has been urgent for a long time. We have been down that road repeatedly from the last century, when the skills gap was discerned, to the third tier of the Education Act 1944 and the technical schools that were devised by Rab Butler, to more recent developments. Our weakness is well documented. The education establishment does not like it, and by a long process of inactivity it has repeatedly hijacked proposals to produce technical and engineering skills that other countries regard as normal. So long as we were wealthy, we were able to tolerate that bias against industry. We cannot under-estimate it now.
I note the merger of the Department for Education and the Department of Employment. I very much regret the Government's declining interest in unemployment. We have to do something about that. Meanwhile, in other areas, there is now an opportunity to bring about a coalescence of education and training, where 150 years of effort have produced one of the greatest failures of Government over that long period.
There needs to be a seamless transition from academic to vocational education to training. Vocational training does not mean the nonsense thought up by those who are trying to recreate in technical education the academic theories, which have only a limited role to play.
I am surprised at the decision to have two permanent secretaries as the joint heads of the new Department. Sir Tim Lankester at the Department for Education and Michael Bichard at the Department of Employment are two civil servants who have much impressed the Public Accounts Committee, but we need to take seriously the concern of Sir Geoffrey Holland, a recently retired, most distinguished, public servant who calls for the new Department to be properly integrated.
That is a task that must be undertaken. A Department with two heads will not produce the integration between education and training for which we have waited too long. Having taken the decision, it is essential to get it right.
The involvement of Government in industry has similarly been disappointing. From the Department of Economic Affairs under George Brown to the efforts of Denis Healey, we have been faced with failure after failure. Faced with those failures to understand industry rather than the City, Denis Healey appointed within the Treasury Alan Lord, a very able second permanent secretary. He had it in mind to give greater prominence to industrial matters.
Alan Lord left the Treasury somewhat saddened. The ethos of the Treasury was against such involvement. The control of public expenditure is the one area of expertise where the Treasury is, understandably, dominant. Other considerations fall well behind that.
We must have a stronger involvement with industry. The City of London is valuable, but it does not properly represent industry, on which we all ultimately depend. The high profile that is given to discussion with the Governor is not mirrored by discussions with industry, which should have even greater prominence. We cannot solve these matters just by dealing with the Governor on a monthly basis. There are much wider issues than that.
We need to recall what the Labour Government did about investment incentives. I had been a strong supporter of investment grants for plant and machinery, which were introduced later in 1966. I believe that they were a major encouragement to investment. The time may have passed when such measures could be reintroduced, but I am a firm believer in a high level of investment allowances.
At 25 per cent., investment allowances are, in many cases, a disincentive. Plant and machinery is rarely worth 75 per cent. at the end of the first year. As far as the loss to the Revenue is concerned, it is a question only of delayed payment of corporation tax. If we are serious about investment, about replacing the capital stock in our industry, about capacity constraints, clearly some sensible investment incentives need to be introduced.
I look forward to resource accounting, which I strongly support. The PAC has examined progress, and work is proceeding on the expectation that, at the end of the century, it will be in place. Our declining infrastructure is concealed by the failure to take note of the capital depreciation in our national accounts.
It is possible to ignore the deterioration of our roads, our housing stock and part of the railway network by ignoring the depreciation of these fundamental parts of the economy. For the past 50 years and more, we have been living off so much of our capital. These decisions should have been recorded and quantified, and open to everybody to criticise.
On economic and monetary union, I note the vital precondition of convergence of real economic performance of the entire European Community. My own view is that a satisfactory convergence between such disparate countries is unlikely to happen. Countries do have differing customs and different traditions. Attitudes do vary.
I have known politicians who have pointed to the way in which those attitudes should be changed. If someone asked me how I can change attitudes, I would hold up my hands. If one said that billions of pounds are required, then there are certain conditions that might be acceptable. Changing attitudes will be more difficult.
If the Chancellor of the Exchequer really wants to make an impact on the future of our economy, he must turn to investment.

Mr. Deputy Speaker (Sir Geoffrey Lofthouse): Order.

Sir Peter Hordern: I am pleased to follow the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who, if I may say so, made a much better speech than his colleague on the Front Bench.
The hon. Member for Dunfermline, East (Mr. Brown) referred to the underlying weakness of the economy, but there was a certain underlying weakness in his speech, too—notably his absolute failure to pronounce on anything to do with the economy and what he would do about it in respect of interest rates, spending or anything else.

Ms Hilary Armstrong: The right hon. Gentleman was not listening.

Sir Peter Hordern: I did listen, and I was greatly entertained by the amusing parts of the hon. Gentleman's speech. Now perhaps the hon. Lady might listen.
I wish to say a word or two about investment, since it plays such a large part in the Opposition's terminology. What the right hon. Member for Ashton-under-Lyne said about the importance of training and education is, of course, absolutely right, but, in parentheses, it is astonishing that, in the United States, where there is no federal system of training, more money is spent on training by individual companies than any of the Organisation for Economic Development countries, so far as I am aware, and without any form of Government investment or attraction.
There is one important question to which the Opposition will have to address themselves, and I believe that it underlines the weakness of successive Labour administrations over many years: the double meaning that is given to the word "investment". There is, of course, investment in the sense of a rapid return, but there is also long-term investment, to which the right hon. Gentleman was referring, in education and training. The difficulty lies in the fact that that investment must be paid for.
The Opposition believe in public investment. They are talking here not about private sector investment, but about education and training and public sector involvement in it. The difficulty they have to face—just as they always have to—is that the money has to be raised, either through taxation, and they are reluctant to say how that money should be raised, or through borrowing. The further difficulty they have is that they are notorious borrowers.
My right hon. and learned Friend the Chancellor referred to the previous Labour Government's record on borrowing. I think that I am right in saying that, in 1976, the share of gross domestic product occupied by the public sector borrowing requirement was 9.5 per cent. It has never been higher under a Conservative Government than it was three years ago, when it was 7 per cent., and that, I have to say, was far too high. It was, however, the 9.5 per cent. that brought in the International Monetary Fund.
Whatever the Opposition say about the merits of training and education, they have to say how it will be paid for. It is no use thinking that the markets, people in


this country or electors will be satisfied with the general appreciation of the word "investment". They will want to know, rightly, how it will be paid for.
We shall go on asking how that money is to be raised. I believe that the Opposition have a duty to say how it will be raised. It is no use their talking about the merits of investment, as though there has been no public investment in training in this country: the record on higher education is excellent, with more young people going into it. They must now come clean on how they propose to pay for the investment, which no doubt is worthy.
There is one thing of which I am quite certain: the position today is very different, so far as the capital markets are concerned, than it was when the Labour party was last in office. Everybody in the House knows the speed at which money goes across the exchanges. There is no question about it: if the Labour party was ever in government and pursued a large investment programme without spelling out how it was going to be paid for, there would be a run on the pound, as has always happened.

Mr. Benn: indicated assent.

Sir Peter Hordern: The right hon. Gentleman nods in agreement. There would be a run on the pound, and it would have to be met by higher interest rates. That is the problem that the Opposition face.

Dr. Jeremy Bray: Will the right hon. Gentleman give way?

Sir Peter Hordern: The hon. Gentleman will have to forgive me, because I want to complete my brief speech.
All I would say is that there is another aspect to investment, and that is the aspect that my right hon. and learned Friend the Chancellor and the Government are pursuing—attracting foreign investment into this country. They are able to do so because we have low tax rates. The right hon. Member for Ashton-under-Lyne referred to investment incentives, but I recollect a corporation tax of 52 per cent. under a Labour Government. It is very much lower now. That is what brings in investment: not only particular incentives but the fact that we are a low-tax country, with no difficulties about labour costs.
The hon. Member for Dunfermline, East, in perhaps an unguarded moment, said of training that he would make companies pay by means of a statutory training scheme. If one adds to that the cost of the social contract, the training levy and the minimum wage, will Britain be such an attractive country to invest in for overseas countries? I have to say that I do not think that it will be.
That again will reverse an important factor in the success of the economy to which my right hon. and learned Friend rightly alluded—the attraction of substantial funds from abroad. We shall obtain improvements by attracting investment and the further progress of the technological revolution which has occurred in the United States and many other countries, not least Britain.
The Opposition talk about large public sector investment. One has only to consider the motor industry and its export record now to see what a transformation has come about because of the attraction of investment into Britain. That is the right way to go about the matter. Any suggestion that there will be massive public sector

spending for any reason, no matter how worthy, will cause great difficulties in the capital markets. If the Opposition were ever to win an election and come into government, they would shortly find that difficulty spelled out for them.
I simply add that it is essential to have a low public sector borrowing requirement. That is what dictates low interest rates. It is interesting how some people say that the great thing is to have the sovereign right to manage one's own currency. Yes, I regard it as a sovereign right to devalue. They say that that is what helps manufacturing industry. If that were so, we would be the richest country in the world, because we have tried if often enough.
Look at the Germans. When I first entered the House, there were DM12 to the pound. Now there are two point something or other. What is the basis of German wealth if it is not manufacturing industry? Why have the engineering companies not suffered from the depreciating deutschmark? They have managed because of the quality of their investment, and that quality is there because of low long-term interest rates. They can borrow easily for 10 or 20 years ahead. Contrast that with Britain's oscillating interest rates and the difficulty of ever making any long-term investment.
I remain an optimist. I am sure that, if my right hon. and learned Friend pursues his policies, we shall have the benefit of extra capital investment in Britain and the fruits of that investment which we so thoroughly deserve.

Mr. Malcolm Bruce: I am a little disappointed that the Liberal Democrats, who are allowed only one contribution to this major debate on the economy, should be confined to just 10 minutes, especially as, unlike Her Majesty's official Opposition, we have a distinctive economic policy.

Mr. Deputy Speaker: Order. I hope that the hon. Gentleman is aware that the Liberal Democrats are not limited to 10 minutes.

Mr. Bruce: I am grateful, Mr. Deputy Speaker. I had not been advised of that fact. I should have appreciated it if I had been so advised. Nevertheless, I shall not detain the House unduly.
The Chancellor of the Exchequer has an opportunity to decide whether he will be a consistent, coherent, disciplined Chancellor who sets out a policy and follows it through, or whether, as seems to be becoming apparent, he has to trim it according to the pressures of political expediency and the requirements of his party to have something to offer the electorate in times of desperation. That is how he will be judged, not just by his colleagues but by outside commentators over time.
The salient point of this year's summer forecast is that every economic indicator projected from last November has turned out to be less favourable. Inflation and public borrowing have been revised up, growth has been revised down and the investment growth estimate has had to be more than halved. In just six months, the Government's forecasts have moved in the wrong direction.
I share with the Chancellor a genuine welcome for the better economic news that we have had in the past 18 months. I agree that low inflation is necessary and needs to be sustained in the long term if it is to create the long-term investment climate that Britain needs. The


upturn or recovery in the economy is welcome, as is the rise in exports and the decline in unemployment, despite the fact that it is from a high base and that there is a question mark about the quality of the jobs being created compared with those that have been lost.

Mr. Forman: The hon. Gentleman has just said that he welcomes the Government's determined approach to controlling inflation and keeping it low. If that is so, how does he defend the important phrase in the Liberal Democrat amendment, which has not been selected? That amendment
deplores the recent moves by the Government to relax its fiscal and monetary disciplines".
That can only be taken as a plea for a tightening of policy.

Mr. Bruce: As a matter of fact, the hon. Gentleman is correct. We have criticised the Chancellor, as he is aware, for having two inflation targets rather than one inflation band and for creating confusion by insisting on the one hand that his policy is to keep inflation below 2.5 per cent. while on the other hand implying that it might rise above 4 per cent. The Liberal Democrats' policy is to have one inflation target of between 0 and 3 per cent., agreeing with the Chancellor that variation must be accommodated, but suggesting a simple and clear target without the element of confusion which creeps in when there are two targets.
There is common ground here. There is recognition of the need to be disciplined and to stick to the broad policy. My question, as I am sure that the hon. Gentleman will appreciate, is whether the Chancellor will have the courage of his convictions as political expediency beckons.
It is also interesting—the circumstances of the Chancellor's elevation to his present post will not be lost on him—that the success over which he has presided has been a direct result of the failure of the Government's previous policies. The boost to our exports, to which reference has just been made, has come as a result of the devaluation of sterling following our ejection from the exchange rate mechanism. There has also been a suppression of domestic demand and a need for record tax rises. That has kept growth under control and helped to keep the Chancellor's inflationary objectives under control.

Mr. Nigel Waterson: The hon. Gentleman spoke of tax rises—I do not find any answer to this point in the Liberal Democrats' amendment—but does he stand by the remarks that he made only on 3 July in a speech, I believe, to Liberal Democrats in the City, when he spoke approvingly of a 50 per cent. higher income tax rate?

Mr. Bruce: As is our party's policy, I made it clear in that speech that, in the interests of fairness and justice, we believe that people earning more than £100,000 a year should pay a 50 per cent. tax rate. I also said that the yield on that money should be used immediately to take 500,000 people at the opposite end of the scale out of the tax bracket. I know that Conservative central office will conveniently edit that reply to include the first half but not the second half, because, objectively, fairness, justice and balance are not a distinguishing feature of the scriptwriters at Conservative central office. However, the answer is on the record.
We cannot claim that what has happened in the past few years, or the recovery that we are seeing, is the economic miracle that some members of the Government

seem to wish to adduce from it. Last year's improvement in the balance of trade was based mostly on a one-off surge in oil exports and net property income from abroad. Manufacturing investment is up—a little—but it has only just passed the peak of five years ago, and the figure is not much higher than it was 21 years ago when Denis Healey was Chancellor of the Exchequer. Manufacturing investment as a percentage of gross domestic product is currently at an all-time low.
There is no room for talk of an economic miracle. There is a basis for improvement on which success can be built, if the current position can be sustained, but we have not reached that stage yet. Even after an active life in politics, I am still astonished that we can now find politically acceptable unemployment levels twice as high as the rates that would have brought down Governments 15 or 20 years ago.
We are currently enjoying a temporarily benign set of economic circumstances, brought about by the failure of the Government's own policies. The Chancellor has recognised that fact and has told the Treasury Select Committee and others that according to his advisers the sustainable growth rate of the British economy is only about 2 to 2.5 per cent. After 16 years of economic experimentation, 16 years of putting British industry through the mangle, the Conservative Government cannot hold out the hope of sustainable growth at a rate of more than 2.5 per cent.—exactly the rate which obtained before they came to power.
Those of us who have dealt with other economies know that in some of the developing economies—which are no longer backward or primitive, but quite mature—there is talk of a recession when the growth rate falls to 8 or 10 per cent. Slow recovery from a long recession is not an economic miracle. To deliver long-term success, we need sustained investment—and the only way to deliver that is to ensure that we invest in education and yield the goods to ensure that we can maintain the health and public services that people want. Any economic commentator would say that that was necessary, but no British Government—Labour or Conservative—have managed to achieve it.
One aspect of the Chancellor's policy is right. My disagreement with him lies in the fact that he seems to think that only a low inflation rate is required to deliver economic success. He is entirely right to accept that long-term, sustainable low inflation is a precondition of success, but he is wrong to assume that it is the only precondition. The problem is this: is the Chancellor sticking to that objective, which is the only basis for his entire policy? Will he be prudent and resist unjustifiable tax cuts? Then will he listen to the advice of the Governor of the Bank of England, who clearly feels that interest rates need to rise now if the Chancellor's inflation target is to be met?
The Chancellor is currently relying on the short-term view that the markets appear to have taken it calmly, but he knows that today's decisions will affect the inflation rate in 18 months' or two years' time. Short-term factors are irrelevant.
The Chancellor has changed his inflation target. At any rate, whatever his arguments to the contrary, most commentators believe that he has relaxed that target. He is becoming a little more difficult to pin down on his


borrowing targets than he was even a year ago. I will remind him of one or two of his statements. In his 1994 Budget, he said:
My objective remains the same: to balance the Budget over the medium term. We remain on course to eliminate Government borrowing entirely by the end of the decade."—[Official Report, 29 November 1994; Vol. 250, c. 1082.]
At the same time, he stated in the Red Book:
The objective is to bring the PSBR back to balance over the medium term.
What does the Chancellor say now? I could not find it in the main report, but in the Treasury summary the following words are now used:
the objective is to bring the public sector borrowing requirement back towards balance over the medium term.
"To" and "towards" are rather different words, as the Chancellor well understands and, no doubt, as the Treasury draftsmen understand. That is a clear indication of a much less rigorous and disciplined approach to borrowing control than the Chancellor's public utterances would suggest.
The PSBR, however, is a fairly crude measure. The general Government financial deficit is, for instance, the measure for convergence for the purposes of economic and monetary union—the benchmark for the 3 per cent. ceiling—because it excludes privatisation receipts. What is the Government's estimate of that? It is fully £21.4 billion for 1996–97, and that is just the Government's current forecast—they have already had to revise their forecasts in the wrong direction over the past six months.
That estimate has been made at what many regard as the peak of the economic cycle, when the Government's estimate of their net investment is £11.3 billion. That means—according to the logic that the Chancellor has expounded during his term of office, and against a discipline that is gaining wider acceptance across the parties—that the Government will be at least £10 billion away from being able to make any responsible tax cuts while maintaining their stance of fiscal prudence and responsibility.
The test is whether the Chancellor has the nerve to do the job of economic policy management, or whether he will succumb to the pressures of political expediency. So far, the Chancellor has ignored the Bank of England's advice that interest rates need to rise. At the Mansion house, he moved the goal posts on inflation; he has left the position more unclear and uncertain than it was before. I speak as one who has admired the stance taken by the Chancellor when his own party has tried to push him off course, as it so often has. As I said in response to an earlier intervention, we suggested a range of 0 per cent. to 3 per cent. No doubt the Labour party will take a view at some point, but thus far it seems reluctant to express one.

Mr. Kenneth Clarke: The hon. Gentleman anticipates me. Would he care to state, on behalf of his party, whether he thinks that we should raise interest rates now, or whether we should have done so a month ago?

Mr. Bruce: I think that the Chancellor will understand my reply. We believe that the Government should set the targets, but that the Bank of England—or the central bank—should implement them. The answer is simple: if the Government believe, or the Bank of England believes,

that the inflation target that the Government say should be adhered to requires an increase in interest rates, the Bank should make the decision. We in the House do not know who is right, and we shall not know for 18 months. I do not think that the Chancellor should be smug in the short term. Our position is clear: the Bank should have been allowed to make the decisions that it considered necessary to implement policies set out by Government.

Mr. Budgen: Does the hon. Gentleman not agree that it must always be the Chancellor's duty to decide how quickly the inflation target should be met? He must take into account wider social and economic considerations than the Bank can ever take into account.

Mr. Bruce: That is an argument in favour of political intervention, but too often Chancellors cannot be relied on to take such objective measures, and their decisions have been made for short-term political reasons which cut across the economic requirements of the time. I believe that the fact that the German economy has built itself on the basis of an operationally independent central bank is one reason for the success of Germany's economic policy.
It must be understood that we are not talking about the Bank of England setting policies. The Government set policies and the Bank implements them. The decisions, however, are removed from the political arena. It has been argued that such action would lead to a lower overall level of interest rates, because it would remove the factor of political uncertainty, leading to a cut of between 1, and 2 per cent. on the prevailing rate of interest.
An item that I have raised in the past week has not been addressed by the Government, or even picked up by the commentators: the moves, following the merger of a number of building societies, to offer substantial bonuses to their members, which will feed into the economy over the next 12 to 18 months. According to the press reports that I have read, they could amount to between £5 billion and £8 billion. The Chancellor—and, indeed, the financial authorities—must keep a close eye on that.
It seems extraordinary that we can debate whether tax cuts of £5 billion are justified in terms of keeping economic policy on course, when building societies over which the Government have no control can suddenly inject between £5 billion and £8 billion into the economy, completely altering the Government's inflation forecast. I do not know what the answer is, but the Government should give some indication of how they intend to respond to that issue.
We need a responsible fiscal policy, not just short-term tax cuts, which, as people know from bitter experience after the last election, would have to be reversed immediately after an election. We need a sensible target for inflation and a reformed central bank given operational independence to enable it to pursue those targets free from short-term political interference.
We need a European policy crafted in the country's and not the Tory party's interests, and we need a macro-economy which recognises the importance of investment to create a climate which can sustain public services, at a reasonable taxation level and at a reasonable share of gross domestic product.
The Liberal Democrats have made it clear that education is the single most important investment that this country needs for the long-term success of our economy. Unlike other parties, we have said not only that we will


spend more on education, but where we will get the money from. The Labour party has tabled an amendment which continues to say nothing about how it intends to deliver anything. It contains blandishments, statements of good intent and a rosy glow of change, but no substance.
It is necessary to have credibility in economic debate, to be prepared to put some facts on one's proposals, to put some costings to one's commitments and to give some indication as to how one would create the mechanism which would deliver the results that one regards as desirable. The Liberal Democrats have done and are doing that. We shall continue to challenge both the Chancellor of the Exchequer as to whether he has the resolve to stick to his commitments, and the Labour party to demonstrate whether it can put forward a coherent programme that will not finish up putting it in exactly the same position as the Government, who are split from top to bottom.

Sir Anthony Grant: I will say this for the hon. Member for Gordon (Mr. Bruce): unlike the official Opposition, he has just a smidgen of policy but, alas, I fear that it will be purely hypothetical and academic in the extreme.
The prime economic task of any Government must be to control inflation without wrecking the industrial base. We have heard a great deal about investment, especially from my right hon. and learned Friend the Chancellor of the Exchequer. The trouble is that the international market believes that in this country, under our political system and in the way in which we conduct ourselves, the will to control inflation is weak. That is why there is what is called short-termism compared with Germany and Japan.
Investors, usually international ones, suspect that political parties, and particularly Labour, will take a short-term political view, so those investors take a short-term financial view: it is as simple as that. The trouble is that with Labour in power the result would be not short-termism but minuscule-termism. It is to the Government's credit that they have maintained low inflation better than their predecessors.
An encouraging and seldom noticed trend among banks is the tendency to move to fixed-term lending rather than the overdraft system. In that sense, an encouraging sign exists that we are moving more towards the European or German system. That will give us more long-term investment, which industry requires.
The battle against inflation, however, is a continuing one. It is affected by matters entirely outside local control, such as commodity prices. Handling inflation in a modern economy is like sailing a giant tanker: it goes on for about five miles after being put into reverse, by which time the other hazards of recession have swamped the decks. Cool pragmatic judgment rather than obsessional dogma is therefore needed.
The Chancellor of the Exchequer is right to resist perhaps the more orthodox Bank of England view on interest rates. I hope that he will continue to take that pragmatic view as what industry and the economy want more than anything else is some degree of stability. I am glad that he has given stability on the interest rate front so that people can plan for the future.
The other thing that we need is export-led growth. As I have said before, after the 1967 devaluation by the Labour party, on becoming Chancellor of the Exchequer Lord

Jenkins of Hillhead—now a member of the party of the hon. Member for Gordon—said, "We must have export-led growth. That is the solution." Unfortunately, he never achieved it, but he was right and my right hon. and learned Friend the present Chancellor has achieved it.
When considering future interest rate policy, I hope that my right hon. and learned Friend will bear in mind two vital sectors: the housing market and construction industry, and the small firms sector. In the 1980s, reliance exclusively on interest rates to curb inflation was catastrophic for both home owners and small firms. I agree with the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who is Chairman of the Public Accounts Committee, about that. That reliance was the cause of the anxiety, the lack of confidence and the absence of the feel-good factor that everyone is seeking.
Added to that, there was the fear of unemployment and the uncertainty about future employment, which happily is now easing. When considering his Budget, however, I hope that my right hon. and learned Friend the Chancellor will have special regard for that especially unfortunate and burdened sector. In addition, I hope that the wise proposals in the Latham report on the construction industry will be attractive to the Government.
The future does not lie with vast companies or supermarket fat cats. A healthy and flourishing small firms sector is the vital undergrowth for survival in the economic jungle. Bit by bit, much has been done to help small firms, but there is an awful lot more to be done.
I want lower taxation. Decades ago, I advocated a shift from direct to indirect taxation because one is a tax on work and the other is a tax on spending. I am glad that that trend has taken place, but taxes can be reduced only if public expenditure is curbed. The only way in which public expenditure can be substantially curbed is by reducing unemployment. I am delighted at the way in which that is going. Otherwise, as my right hon. and learned Friend says, the solution is a hike in interest rates, which is the last thing that industry, and especially small industry, wants.
We are a parliamentary democracy and we and the public are entitled to know what is the policy of Her Majesty's official loyal Opposition. We shall ask them that again and again and again. What is their policy? As the hon. Member for Gordon said, their amendment is clearly a mass of platitudes. Would they increase or reduce taxation and, if so, by how much and which taxes? Would they increase public expenditure, as their spokesmen nearly always imply, or reduce it? Would they raise or lower interest rates? Or do they really believe, as I do, that the Chancellor has got it about right?
I used to be fond of the previous Leader of the Opposition. I thought that anyone who was keen on rugger could not be all that bad, but I am not sure about the present one. At least one knows where the right hon. Member for Chesterfield (Mr. Benn) stands, even if one disagrees with him. We are not allowed to refer to an amendment which has not been selected, and its non-selection must be a great relief to the official Opposition as it contains two fairly dirty and obscene words which may send a shudder down their spine. It refers to "socialist policies". The terror that that must have struck in the Opposition's hearts is awful to consider.
I will say this about the right hon. Member for Sedgefield (Mr. Blair), the Leader of the Opposition: he has a nice smile—but I question what lies behind it and what policies, if any, lie behind it. He reminds me very much of the Cheshire cat in "Alice's Adventures in Wonderland". Poor little Alice was rather like the electorate. Lewis Carroll wrote:
she was a little startled by seeing the Cheshire Cat sitting on a bough of a tree.
The Cat only grinned when it saw Alice. It looked good-natured, she thought: still it had very long claws and a great many teeth,"—
that is the hon. Member for Bolsover (Mr. Skinner) and his friends—
so she felt that it ought to be treated with respect.
'Cheshire Puss,' she began … 'Would you tell me, please, which way I ought to go from here?'
'That depends a good deal on where you want to get to,' said the Cat.
'I don't much care where—' said Alice.
'Then it doesn't matter which way you go,' said the Cat.
'—so long as I get somewhere,' Alice added.
'Oh, you're sure to do that,' said the Cat, 'if you only walk long enough.'
Alice said 'I wish you wouldn't keep appearing and vanishing so suddenly: you make one quite giddy.'
'All right,' said the Cat; and this time it vanished quite slowly, beginning with the end of the tail, and ending with the grin, which remained some time after the rest of it had gone.
'Well! I've often seen a cat without a grin,' thought Alice; 'but a grin without a cat! It's the most curious thing I ever saw in all my life!"'
In 30 years in Parliament, I have sometimes seen a policy without a grin, but a grin without a policy is the most curious thing that I have ever seen. To end with the immortal words of Private Eye, which I hope will get a response from the Opposition, "I think we should be told."

Mr. Tony Benn: I and some of my hon. Friends have tabled an amendment which, in a way, acquits the Chancellor of the main responsibility for what has happened because it says that the problems confronting this country are inherent in a system that puts profit above people. If I distributed the Chancellor's speech to my constituents, they would not believe that he lives in the same world as they do.
There is mass unemployment in Chesterfield because the pits were deliberately closed. Unemployed people come to my surgery and say, "What about a job?" Other hon. Members must have the same experience every week. People say, "My daughter is getting married. What about a house?" Another constituent will say, "My son wants to go to college. What about a grant?" I am told, "My auntie cannot get a hip operation. Granddad cannot live on the pension."
Anyone who thinks that the Chancellor's speech, in which he scored debating points about quotations—an absolute waste of time—will carry any weight, is making a grave mistake. Conservatives boast that the number of days lost in industrial disputes has dropped, but 2.5 million days are lost, every day because of unemployment. Unemployment is the policy. It lowers wages, undermines the unions and boosts profits. Homelessness does the

same. Someone who sees a person in a cardboard box on the embankment will say to himself, "If I had a row with my employer and cannot keep my job and am dispossessed of my house, I will be in a cardboard box on the embankment." The Government have not an economic policy but a political strategy to put a handful of rich people at the top and the rest in fear.
Has anyone ever asked how many home owners have mortgages? There are a great many home buyers, but not a great number of home owners who have paid off their mortgages. Another term in use nowadays is "customers" and those who have no money are not "customers". They have found a word that dehumanises and depersonalises the poor so that they do not have to think about them. People in cardboard boxes are not on the electoral register. How can anyone say, "Put me down on the register as being in the cardboard box behind Marks and Spencer"? Those people do not vote, and that is part of the political strategy.
The Government should not think that anxiety has not spread up to the middle classes because many professional people are on short-term contracts and many people are on low pay. If the Chancellor ever has a discussion about why there has been a shift in political opinion in this country, he will find that it is because the anxiety of the capitalist society has spread to layers of people who thought themselves exempt. Of course the policy is based on fear.
We hear much about how marvellous is the German economy, but there are 20 million unemployed in the European Union. Does not anybody relate that to what happened before the war? I am old enough to remember Hitler coming to power. I bought "Mein Kampf" when I was 12 years old and I still have my copy. The 6 million unemployed in Germany produced Hitler, and when there is unemployment, people turn on each other. Sir Paul Condon, the Commissioner of Police of the Metropolis, has issued one of the most disgraceful statements that has ever been made. He is building up the feeling that, if there is a crime problem, it is due to blacks. When people are unemployed, they turn on others.
The breakdown of the social fabric is much more important than the feel-good factor. I do not know who feels good or why, but if we break down the social fabric and turn people one against the other, we will pay a much higher political price than we would in dealing with the problem that is before the House or the aspirations in my amendment. The second world war was the cost of monetary policies, which are the same as those that are now being pursued. It cost us 50 million lives and God knows how many billions of dollars.
The right hon. Member for Horsham (Sir P. Hordern) says that, if Labour gets in, there will be a run on the pound. What he told us is what the left has been saying for years—that this House does not decide anything. Decisions are made by international gamblers. Every night, I listen to the world economic news on the BBC and there is mention of the Dow Jones industrial average. I have never met Mr. Dow Jones, but by God I have to give him credit for keeping at it. Night after night, when we are all in bed, he is working on his bloody averages, and they decide what happens.
Sometimes, we are told that sterling has dropped three points of decimals against a basket of European currencies. I have never had such a basket of currencies, but I would not mind taking one on holiday. As a result,


the Health Secretary closes three hospitals and the pound rises again because all policies are now determined by international capital demands. That is why my amendment is a little more fundamental. I should like to make fun of the Chancellor's earlier speeches but that would be difficult because I confess that I have not read them. Let us try to face the reality, which is that Parliaments and Governments do not control anything any more.
There was an article in the Financial Times recently by the BBC's economic correspondent in the World Service saying:
In Africa it would be better if the countries were run as commercial enterprises rather than Governments.
Later, in order to answer a question that might be asked, he said:
What room does that leave for democracy? That question can be asked everywhere in a world where bond markets dominate much of the decision-making process in the world. Democracy is in a sense on the way out.
Without trying to provoke individual responses, I am trying to say that we must face the fact that the globalisation of world markets has destroyed the value of the ballot box as a link to political and economic power. That will happen to an incoming Labour Government, although I will not go into that. Everybody knows that that will happen. It happened to Healey in 1976. He has now decently written a book saying that he made a mistake about the IMF, but that does not matter.
Wherever we look, the triumph of capitalism is being celebrated, but if it is so triumphant, perhaps we should look at some of the figures. One fifth of the world's population of 5.6 billion live in extreme poverty. The richest fifth in the world have incomes that are 30 times higher than those of the poorest people. Poverty-related diseases claim the lives of 35,000 children every day, and 500,000 women die each year from causes related to pregnancy and inadequate health care. Some 1.3 billion people have no clean water. That is the result of the capitalism that has triumphed. Communism has gone and the capitalist world is not stable: it is inherently unstable.
It is democracy that is being attacked, not socialist ideology. They do not want the common people without the cash to use the vote to buy collectively what they cannot afford individually. The huge achievement of the chartists and the suffragettes was to get some grip on economic policy through the ballot box.
I am not the first person to quote Harold Macmillan. I did so when I intervened on the Chancellor and perhaps I may read the quote to him again. In his book, "The Middle Way", published in 1938, Harold Macmillan said:
We have lived so long at the mercy of uncontrolled economic forces we have become sceptical regarding any plan for human emancipation. Such a rational and deliberate reorganisation of our economic life would enable us out of the increased wealth production to establish an irreducible minimum which might progressively be raised to one of comfort and security.
The Labour manifesto of 1945 did not attack the Conservative party because in those days we did not have abuse, we had argument. That manifesto stated:
The great inter-war slumps were not acts of God or blind forces: they were the sure and certain result of the concentration of too much economic power in the hands of too few men.

Gaitskell, one of our more moderate members, when he spoke in the House on 5 December 1945 after Churchill had moved the first motion of censure on the Labour Government, said:
We believe … that the present capitalist system is inefficient, that it produces insecurity and that it is unjust. Can anyone deny those things?"— [Official Report, 5 December 1945; Vol. 416, c. 2364.]
Therefore, no one should think that my amendment, which, alas, has not been called but which may be studied, contains new ideas. They are rooted in human aspiration and no one can tell me that they cannot be implemented. If there can be full employment in wartime, it can be had in peacetime. If every youngster of 17 could be put in uniform to kill Germans, surely young people could be recruited to build homes or to become nurses or teachers or to clean up the environment or look after old people. Of course that could be done, but it is not profitable, and that is why it is not done.
Until this society—in that I include my Front-Bench colleagues—addresses the question of whether to put profitability above people or people above profitability, these problems will not be resolved. Do not think that the Chancellor, with his triumphalism, is convincing anyone. More and more people are learning what is happening. If they cannot express themselves through the ballot box, do not be surprised if we have the riots. That is not the right way to do it, but a disfranchised nation will not accept the injustice forced on it by a policy of the kind that we have had.

Sir Thomas Arnold: The current monetary framework has been in place for three years. The inflation rate during that time bears healthy testimony to the wisdom of the policy that the Government have chosen to follow. I support what my right hon. and learned Friend the Chancellor said in announcing the new inflation target one month ago. He said in answer to a written question:
Beyond this Parliament I propose that our aim will be to continue to achieve underlying inflation—measured by the RPI excluding mortgage interest payments—of 2½ per cent. or less. Monetary policy will be set consistently to achieve this target. This should ensure that inflation will remain in the range 1 to 4 per cent."— [Official Report, 14 June 1995; Vol. 261, c. 517.]
That statement showed confidence in the future and confidence in the present policy.
It is absolute nonsense to suggest that the goalposts have been moved or that policy has become more discretionary or relaxed. On the contrary, the Government have repeated what policy has been for some time now. That has done wonders for confidence. It shows exactly what the Government intend to do in respect of monetary policy.
The monetary framework that the Government put in place three years ago consists of three components: the inflation target, to which I have referred, the inflation report published by the Bank of England and the published minutes of the monthly monetary meeting. I should like to deal with the two latter items in turn.
The great advantage of the inflation report is the transparency that it confers on the decision making within the Bank of England. It shows carefully and clearly the intellectual influences at work. It makes absolutely no attempt to hide any of the forces which are taken into


consideration. I was particularly impressed in that regard by the evidence given to the Treasury Select Committee recently by Mr. Mervyn King, the chief economist at the Bank of England. He described in some detail what was taking place in the labour market. The facts and figures are there for all to see in the inflation report.
Mr. King referred to what he called the tale of two cities. Most of us can see what he meant when we consider what is taking place in our constituencies. The sectors directed towards the export or net trade sector are growing rapidly. In those sectors, one can see evidence of capacity constraints. The sectors directed primarily towards domestic retail spending are weak. In housing and construction they are extremely weak. There is no sign of any capacity constraints.
So we are seeing a recovery the pattern of which is very different from anything that we have seen for a long time. Net trade, although volatile, is the main driving force behind the recover. My view is that there is still plenty of capacity in the economy and that we should take account of that fact in deciding whether to raise interest rates. My right hon. and learned Friend the Chancellor has been right to take a robust stand on interest rates and to make a fine judgment which so far has won the backing of the markets. That brings me to the published minutes of the monthly monetary meeting.
The meeting represents a considerable step forward, once again, in the transparency with which economic policy is now made. I hope that the Labour party sees fit to applaud the publication of the minutes, which means that, for the first time ever, it is perfectly obvious to everyone what specific arguments are put forward by the Governor of the Bank of England and by the Chancellor. There can be no doubt whatever how the decision not to raise interest rates at the celebrated meeting on 5 May was reached.
My right hon. and learned Friend the Chancellor made it perfectly clear that there were conflicting pressures which had to be accommodated and conflicting arguments that had to be addressed. There were clearly cost pressures arising from increased commodity prices and a weakening exchange rate. On the other side, there was clear evidence that demand pressures within the economy as a whole were not so great as to warrant an increase in interest rates. My right hon. and learned Friend took the decision not to increase interest rates. I applaud him for that decision. I applaud the transparent way in which he showed to the world his internal thought processes, how he reached his decision and why on that occasion he did not accept the advice given to him by the Bank of England.
The transparency of policy within the new monetary framework is serving both the Government and the country well. I hope that my right hon. and learned Friend will persist in his policy and keep his nerve.

Mr. Terry Davis: There is no question but that the most important problem that Britain faces today is unemployment. It is important not only because of the direct effect on families whose members are unemployed, with the effects of poverty and everything else that goes with unemployment, but because

it represents a waste of resources. Even within the Government's narrow vision, unemployment should be seen as important, because it represents a cost to the Treasury.
My greatest condemnation of the speeches of Government Members this afternoon is that they paid so little attention to the importance of unemployment. All my right hon. and hon. Friends have drawn attention to unemployment and rightly argued that the immediate and urgent priority is to increase investment and training. Of course, the two go hand in hand. They are essential.
To be fair to the right hon. Member for Horsham (Sir P. Hordern), he referred to training. He drew attention to the fact that, in the United States of America, more was spent on training than in Britain. He said that the money was spent not by the federal Government but by private companies. He could have added that more is spent on training in many other European countries than in Britain. I suspect that much of that money is spent by private companies. However, the right hon. Gentleman did not face the logic of his statement. The fact is that, in Britain, private companies are not spending money on the essential training that we need, so it is a job that the Government must undertake.
The right hon. Member for Horsham asked how training would be paid for. The answer is that we certainly cannot pay for it if we take the earliest possible opportunity to reduce taxes. We could provide for investment, through either investment allowances, as my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) suggested, or some system of investment grants, which I personally prefer—we can discuss the details, but the important thing is to boost investment. We could provide training. Yet we cannot do those things at the same time as reducing taxes. We did not get from the Chancellor of the Exchequer any consideration of those points.
Instead, we had a speech which consisted mainly of a series of jokes. The biggest joke was when he described himself as a conviction politician. I wondered whether I heard him right. It seems to me that what we had this afternoon was a complacent politician. His speech had throughout it a thread of complacency about the economy. We have a reduced forecast for growth, a higher forecast for inflation and a lower forecast for investment. If he had given us a forecast for unemployment, which he refused to do, he would have given us in the medium term a higher one than was previously forecast. Yet, against that background, he described the slowdown as a change of pace. I suspect that, when the economy goes into its next recession, the right hon. and learned Gentleman, if he is still the Chancellor of the Exchequer, will say that we have simply gone into reverse gear. He does not understand the effects of the present economic policies and his forecasts.
The Chancellor says that the economy is doing well. He says that it is on course for steady recovery, which will continue in years ahead. He says that living standards will rise this year, in 1996 and in 1997—that sounds to me like a significant year—in the year after that and, the Chancellor trusts, in the years after that, too. However, if he had been more open, if he had given us some of that openness of which he boasted, he would have told us the undisclosed truth, which is that he expects the recovery to


come to a stop in 1998 or 1999. It will probably be then, because the effect on employment and living standards always lags behind the rest of the economy.
Indeed, the Chancellor gave it away when he told us that the Budget will be balanced at the top of a cycle, which suggests that the economy will next go into recession. That is the problem in this country: recovery followed by recession followed by recovery followed by recession. It is the business cycle. The Government simply do not want to change that sequence.
Increasingly, people are conscious that recoveries are going to be followed by recessions. That is one of the causes of the insecurity that people feel. They do not expect recovery to last. They know that the economy is going to the top of the cycle and then, as it goes down, unemployment will go up.

Mr. Michael Stephen: Will the hon. Gentleman give way?

Mr. Davis: I have not got time. There should not be interventions when speeches are limited to 10 minutes.
At the end of each recovery, unemployment is left higher than it was at the end of the previous recovery. Every time that we go into recession, we start with a higher level of unemployment than we had at the start of the previous recession.
The Chancellor of the Exchequer told us that the tax take, as he calls it, was lower than forecast. He blamed that on lower inflation. The fact is that the tax take is lower than expected because unemployment is high. It is employment—people having jobs and paying income tax—that affects the tax take. The Chancellor left that out of his speech.
The Government are concerned about reducing taxes in the next 18 months. They have not even pretended this afternoon that they are using some theory of trickle-down economics. They do not suggest that tax reductions will reduce unemployment. They will reduce taxes to spread the message. The Chancellor of the Exchequer gave it away when he said that they would spread the message of rising living standards and falling unemployment between now and the general election. The issue is what will happen after the general election. We know what will happen: the economy will go into another recession.
The Government should use the money that they will use to reduce taxes for investment, training and creating jobs. That does not mean creating work. There is no need. The need for work is everywhere to be seen around us in our constituencies. It is a matter not of creating work but of employing people to undertake the work in front of our eyes: the housing shortage, the terrible provision of care in the community, social services. They are all labour-intensive. That is what we should use the money for if we are serious about reducing unemployment.
People who are employed pay taxes. The Chancellor of the Exchequer gave no forecast or target for unemployment. He told us that he had a target for income tax—20p in the pound; he told us that he had targets for capital gains tax and for inheritance tax—zero. What is the target for unemployment? A Government worth their salt who justified the confidence of the country would face the fact that it is unemployment that people care about most. The economy is not good enough. We have to a find a better economy. We have to find an economic system that will deal with the problem of unemployment.

The biggest condemnation of the Government's complacency is that they do not understand the need for a new economy.

Mr. John Townend: Ever since Mr. Soros blew us out of the exchange rate mechanism, our economic situation has got better and better. In retrospect, even most members of the Government would admit that he did us a good turn. To their credit, the Government have taken full advantage of that opportunity. Despite the fact that the value of the pound has dropped by nearly 15 per cent. and that everyone forecast that that would feed through into inflation, the Government have kept inflation consistently down. We should congratulate the Government on the skill with which they have operated monetary policy and which has made that possible.
Despite the gloom of the Opposition, the economy has been growing for three years. What has been so pleasing is that it is the first export-led recovery in my lifetime. I believe that the prospects for non-inflationary sustainable growth are very good. Because of the success of our exports, the balance of payments deficit has dropped dramatically. The hon. Member for Birmingham, Hodge Hill (Mr. Davis) talked about unemployment. That has also dropped dramatically—in the last fiscal year by no less than 372,000. That is a pretty good record. The budget deficit is also falling.
Why then is there a feeling among much of the public that things are not getting better? I think that my hon. Friend the Member for Hazel Grove (Sir T. Arnold) put his finger on the main problem. It is that we have almost got two separate economies: the successful manufacturing export industry, which is doing very well indeed, and what could be classed as the home-based industries. The housing market in many places is still drifting downwards. The construction industry is flat. Consumer spending is weaker than we expected. The leisure, hospitality and drink industries are not doing well. I speak from some experience of those industries. The figures in June were generally very poor. The retail trade has undoubtedly been affected by the enormous amounts of money being spent on the national lottery and the fact that the draw is held on a Saturday night.
In many areas, business confidence is falling. After a very buoyant last quarter in 1994, in the first quarter of this year growth slowed. I expect that, in the second quarter, as a result of the Budget, it will slow down further. Inflationary pressures are almost all imported due to high raw material prices. There has been no upward pressure on wages during this recovery. Indeed, I believe that at long last we are moving slowly into a low-inflation culture. While increased raw material prices have forced up manufacturers' costs, manufacturers have not been able to pass those costs on to wholesalers and retailers. When retailers have tried to pass them on, the public have refused to buy, and discounting and sales have followed.
Manufacturers have undoubtedly been much helped by our supply-side reforms and increased productivity and efficiency. In the private sector, strikes are virtually unknown. I think that the large increases in raw material prices will now ease off. Indeed, in the past few weeks there has been a significant drop in the price of coffee.
Investment has been somewhat disappointing overall, but if we consider the figures carefully, we see that investment in buoyant manufacturing industry is quite good. All the factors that have caused pain and lack of confidence in the non-exporting sector have a bright side, in that they make the necessity or likelihood of raising interest rates much less, especially taking into account the lead of the United States, which has recently reduced interest rates. It was followed by France, and I think that other countries will follow. It seems likely that the United Kingdom is near the top of the interest rate cycle.
I congratulate my right hon. and learned Friend the Chancellor on not putting up interest rates last month. He had the right feel. A further rise now would be bad for the Government, the housing market and the internal economy. I would like to see the second and third quarter figures before any change was made.
There is one factor which, more than anything else, has prevented the Government from getting the feel-good factor from that outstanding economic performance. Increases in taxation are, without doubt, the Government's Achilles' heel. Last week, my right hon. Friend the Prime Minister said that he wanted to lead his party from the centre-right and reduce taxes as soon as possible. In the spirit of reconciliation and unity that is sweeping our party, which was illustrated by the Cabinet reshuffle, it behoves us all on the Back Benches to help the Prime Minister achieve his aim to reduce taxes and fulfil his election commitments.
The task before us is very demanding. Since the previous election—we cannot deny it, it is in the Red Book—the tax burden has risen enormously, almost to the level that it reached under the last Labour Government. The Chancellor told the Treasury and Civil Service Select Committee that his tax increases were equivalent to roughly 7p on the standard rate. Under the present plans in the Red Book, we can cut taxes only if one or more of three things happen. First, the economy could grow faster than planned in the Red Book. This year's forecast for growth was 3.25 per cent. and has already been downgraded to 2 per cent., so that is not likely.
Secondly, we could slow down our budget deficit reduction programme, which the summer book shows will be £16 billion in 1996–97. I would personally not be prepared to cut taxes by increasing the level of borrowing. I do not think that my right hon. and learned Friend the Chancellor of the Exchequer or my right hon. Friend the Prime Minister would want to either, because it would cause the pound to come under pressure and be likely to force us to increase interest rates.
We are therefore left with the final option, which is to cut public spending. We should aim to cut the control total this year by some £10 billion. If we manage to cut it by only £7 billion, we can reduce by half the burden that we have imposed on the taxpayer since 1979.
Anyone who has to make cuts in industry and has done so in a recession knows that, to make cuts, one has to be tough and courageous, have the will power to force through one's cost reduction programme and pay attention to detail. One rarely achieves the objective with a few big cuts in a few areas; what is needed are thousands of small reductions in every area. I hope that events prove me

wrong, but I sometimes—only sometimes—doubt whether the Government have the will power to take the action required.
I could talk for an hour about ways to cut public expenditure, but I know that you would not let me, Madam Speaker. However, I shall run through a few ideas. According to the Red Book, we are aiming to increase—not cut—real expenditure next year by 0.5 per cent. If we said that there would be no real growth, we would save £1.3 billion. I have mentioned the reduction in unemployment. That would save us around £800 million and, in addition, the extra people in work would be paying tax and national insurance contributions. We could cut half a billion pounds off the overseas aid budget. We have the sixth largest overseas aid budget in the world, but we are certainly not one of the six wealthiest countries.
We could cut £200 million from the heritage fund, as the lottery is pouring more money into sport and the arts. We should declare war on waste in the public sector— wherever we look, there is waste and overmanning. There should be a recruitment freeze on all staff except police, teachers, nurses, doctors and the armed forces. To be fair, some Departments have made savings, but in the past, any savings have not gone back to the Treasury but have immediately been re-spent by the Departments in question. Those savings should be used to cut taxes.
We should remove the cap on local authority spending, but cap the funds provided by national Government and go back to the old definition of public spending. We should put the squeeze on local authorities and force them to address the problems of waste and overmanning. My hon. Friend the Member for Dartford (Mr. Dunn) has a very good suggestion: we should penalise local authorities that do not collect council tax and rent arrears. Some local authorities have millions of pounds outstanding. We should reduce those councils' grant by a certain percentage, which they could make up by being more efficient.
If inflation comes down faster than forecast, instead of the Departments being allowed to spend the money saved, it should be clawed back. We should abolish the national health service's stores department, apart from the buying office, and thus save £50 million. We should also cut down on consultancy expenditure, advertising and glossy brochures. Personally, I do not think that we are achieving anything in Bosnia—we should bring the troops home.
The cost of illegal immigration is very high—45,000 immigrants are costing us £210 million a year. There should be quicker repatriation, so that people who have no right to be here are not able to string out the procedures and draw social security while they are here. We should make further savings in the social security budget, and I am pleased that the Government are making moves in that direction.
One of the most disturbing results of our generosity with social security is the fact that the number of young girls—not widows or divorcees—who have just left school and caught on to the idea of gaining benefits by having a baby, although they are without a proper relationship or a husband, has increased threefold.
I could go on—

Madam Speaker: I know that the hon. Gentleman could go on for a long time, but his 10 minutes are up.

Mr. Geoffrey Hoon: I was somewhat relieved when the hon. Member for Bridlington (Mr. Townend) embarked on his usual diatribe and called for public expenditure cuts, because until then I had agreed with some of his analysis of the British economy, especially his comments about the two economies. I am surprised, however, that, given his analysis, he does not draw the obvious conclusion, which is that the two economies—the export-led economy and the domestic economy—are clearly products of the one policy that the Government have pursued since September 1992— devaluation.
The reason why the export economy is relatively successful is that it has benefited from something like a 20 per cent. cut in the value of the pound since September 1992. There is no evidence that any of that benefit has fed through into the domestic economy. That is precisely what the hon. Gentleman was describing and precisely why I suspect that Opposition Members will agree with such an analysis.
Any assessment of the Government's abject economic performance shows clearly how they have failed to tackle the central weakness of the Conservative-controlled British economy. We have low growth combined with high unemployment. Since 1979, Britain has had the lowest growth rate of any European Union or G7 country. The Conservatives' record means that we are firmly in last place in the growth table. That is the longer-term perspective but, even in the short term, there is precious little sign of improvement.
The Treasury's summer forecast for growth, inflation, borrowing and investment reveals that the outlook for the economy has worsened since the November Budget. The forecast implies that the average growth for 1988–98 would be no higher than 1.7 per cent., which is the average growth rate in the United Kingdom since 1979. It is the slowest rate among all EU and G7 countries combined.
The forecast for underlying inflation has been revised upwards from 2.5 per cent. at the end of 1995 in the Budget to 3 per cent. in the summer forecast. The Treasury hopes that inflation will fall to 2.5 per cent. by the end of 1996, but the City and the Bank of England anticipate underlying inflation in the range of 2.5 per cent. to 4 per cent. The public sector borrowing requirement is forecast to be £2 billion higher, at £23.5 billion for 1995–96.
In the Budget, the Treasury forecast that business investment would increase by 10.7 per cent. in 1995, but that forecast has now been halved to 4.75 per cent. It is a doubly depressing picture—a significant reduction in the level of investment combined with some pretty poor forecasting. If we cannot rely on Treasury assessments of the performance that we can expect in the economy, it is difficult to rely on other Government statements.
The deteriorating position of the British economy requires action that only a Labour Government can offer. We have repeatedly heard Conservative Members complain that Labour has no economic policy, but we have debated the fundamental principles of our economic policy in public. It is not often that the new clause IV has been quoted since we had our debate to change Labour's constitution, but we set it out for all to see. It states that we believe in

a dynamic economy, serving the public interest, in which the enterprise of the market and the rigour of competition are joined with the forces of partnership and cooperation to produce the wealth the nation needs and the opportunities for all to work and prosper.
[Interruption.] I am sorry that Conservative Members are scoffing at principle. One needs principles to start with, and principles are precisely what the Government's economic policy lacks. We have no idea where it is going because the Government simply switch from one principle to another as the need arises.
In my opening remarks, I mentioned the devaluation that has occurred since September 1992. Before then, we were told that the Government's economic policy was based entirely on maintaining our position within the exchange rate mechanism. Miraculously, since September 1992, Ministers have been boasting about the success of their economic policies, success achieved only because the Government were forced out of the ERM. There was no principle involved, so to accuse Labour of lacking policy is to miss the point. We have principles, and it is on those principles that we have built an economic programme aimed at high investment, high growth, high skills and high productivity in order to rebuild our economy, raise living standards and promote the creation of a fair and just society. That is our objective, and I have outlined the starting points.
Labour is committed to the goal of the 1944 White Paper, which stated:
The Government accept as one of their primary aims and responsibilities the maintenance of a high and stable level of employment".
Is that one of the present Government's primary aims? Is it something that they see as one of the important features of their economic policy? If so, why have they so singularly failed to achieve it over such a long period?
We have specific policies aimed at tackling the problem of unemployment which, as my colleagues have rightly said, is crucial to the success of our economy. Our first priority will be to tackle the problem of job creation. To increase the number of jobs in the short term, we have talked about the phased release of capital receipts, so that local authorities can build homes. We have proposals for public-private partnerships, at national and local level, to boost infrastructure investment and create jobs. We have called for environmental initiatives to create jobs through a nationwide programme of energy efficiency, to provide better insulation and improve household energy conservation standards. All those proposals would create employment. We have also talked about an expansion scheme for small businesses, to enable them to invest and meet the needs of a modern economy.
Alongside those proposals, we believe that central to the task of promoting employment in the last part of this century will be our determination to invest in the skills of our people. We are committed to a programme of lifelong learning for all. We can achieve that only by raising standards in our schools and by improving access to colleges and universities. We want every young person to be encouraged to remain in mainstream education and training. We want to develop a system of training and education for 16 to 19-year-olds, which will combine academic and vocational qualifications.
We have talked about specific training schemes for women and the ethnic minorities. We have talked about introducing a national skills audit, to identify skill shortages and to target resources to provide training,


which will lead to employment. [Interruption.] Conservative Members are scoffing, but they should not simply rely on their Conservative central office briefs telling them that Labour has no policy. The things that I mentioned are Labour's policies. They have been set out and debated in public. Conservative Members should consider them before they simply repeat the chorus that central office wants them to repeat in such a debate.
We want to establish a university of industry. We shall provide new opportunities for retraining, to ensure that the skills that companies already have are improved to meet the challenges of the modern economy. Those are published policies that Conservative Members can read instead of relying on the material supplied to them by central office.
The strategy that I have outlined is crucial, because the Bank of England's February inflation report pointed to Britain's lack of capacity and the slow response of investment in the recovery as a threat to that recovery's sustainability. There is not any significant evidence— again, this is pretty much what the hon. Member for Bridlington was saying in his analysis of Britain's economy—that the recovery is being sustained. We shall sustain that recovery only if we recognise that the Government have an important role to play in encouraging higher levels of investment.
Government cannot second-guess commercial judgments of investors and managers, but we can change the system of corporate governance to give greater incentives to longer-term finance and opportunities for business to secure start-up capital. We must look at the ways in which we can adjust the corporate tax and financial system to encourage that longer-term investment.
We have talked about encouraging the capital gains tax system to promote that longer-term investment. What has been the Government's response to that? The Prime Minister announces that he wants not only to abolish inheritance tax but to eliminate capital gains tax. No Conservative Member has offered an explanation of how that would be achieved; or where the £3 billion—the cost of such abolition—would come from. If any Labour Member made such a commitment, there would be hysterical outrage on the Conservative Benches about where the money was to come from. We need a Minister to answer that question. Where will the £3 billion cost of the abolition of inheritance tax and capital gains tax, which the Prime Minister announced, come from?
In stark contrast to the Government's laid-back, laissez faire policy, we have a specific series of policies designed to meet the needs of the British economy in the last part of the 20th century. We believe that, by investing in our future and by investing in the skills, training and talents of all our members of society, this country can face up to the difficulties of an increasingly competitive global economy, to ensure that Britain and its people can prosper in the next century.

Mr. Barry Legg: We have just heard an audacious speech from new Labour, by the hon. Member for Ashfield (Mr. Hoon). The audacity of his speech takes some believing. He had the gall to

mention the exchange rate mechanism and Britain's exit from it. His Front-Bench spokesman, the hon. Member for Dunfermline, East (Mr. Brown), will not even answer a question on whether he believes in fixed exchange rates.
The hon. Member for Ashfield also had the audacity to mention the European Union. As a socialist—I use that term very loosely—he failed to mention that there are more than 20 million unemployed people in the European Union. He then went on to talk about spending capital receipts. He was really talking about increasing spending and increasing borrowing, and we have been down that route before—under old Labour. What we have heard from the hon. Member for Ashfield is not a prescription for a successful economy.
In recent weeks, we have had quite a lively debate about the merits of tax cuts, especially on the Conservative Benches. I do not intend to spend much time talking about tax cuts and where they should be focused. We face more immediate economic issues, particularly in the areas of monetary policy and public expenditure. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) commented on the new timetable for debates on economic affairs that has arisen since the unified Budget was introduced. We tend to have rather long gaps between economic debates now, but that can be helpful if it enables us to take a longer perspective on our economic affairs.
On reading the summer economic forecast produced by the Treasury, we find that some quite significant changes have taken place since the Budget in November. The estimated tax revenues for the current year are forecast to rise by around 11 per cent. compared with the financial year that ended in April. Since the last Budget, we have also had two increases in interest rates. They have risen by 1 per cent. and there has been a consequent tightening of monetary policy.
The effect of those changes is shown in the economic projections in the summer forecast. The economy is starting to slow down fairly significantly in certain areas. First, the forecast of the growth in domestic demand for the current year has dropped since the Budget, from 2.75 per cent. to 2 per cent. The forecast for manufacturing output has been reduced from 4.25 per cent. to 3 per cent. Indeed, the figures for manufacturing output announced yesterday showed a fall of 0.1 per cent. for May and of 0.4 per cent. since April. We are seeing a marked slowing down in manufacturing output.
Growth in consumer expenditure is also forecast to be at 2 per cent.—not 2.5 per cent. as in the Budget forecast. The forecast for fixed investment has been reduced from 5.75 per cent. to 3 per cent. At the same time, as my hon. Friend the Member for Hazel Grove (Sir T. Arnold) remarked, retail sales have been flat over the past 12 months. There is clear evidence of a marked slowdown in the UK economy. I think that in 1995 we shall see a growth pause.
I have no doubt that the Chancellor's decision on 5 May not to increase interest rates was correct. Many hon. Members have remarked on that decision in the debate. I consider that we may now have reached the peak of the interest rates cycle. The next move in interest rates is likely to be down, and that could be more significant for the UK economy than adjustments in taxation levels in the November Budget.
The prospects for the world economy as a whole have also somewhat diminished in comparison with what we were considering six months ago. The prospects for growth in Germany, the United States and Japan are not as great. The international inflation risks have also been reduced. There can—I think—be no case for higher interest rates in the UK economy in 1995.
The other interesting changes in the summer economic forecast are those of the projections for the public sector borrowing requirement. The projected figures for the next two years have worsened by some £6 billion, which is mainly due to a fall in income tax receipts in the current year of some £1 billion, and a fall in VAT receipts from that projected at the time of the Budget of some £3 billion. Receipts from taxes are falling and that is also a sign that the economy is slowing down. Monetary policy should not be tightened further.
My right hon. and learned Friend the Chancellor has set a new target for inflation for the coming years and beyond the end of this Parliament. He is right to have medium-term targets for inflation and he is right to aim for inflation in the region of 2.5 per cent. My only criticism of the Chancellor is that he suggested that inflation might go over 4 per cent. due to events beyond our control and he referred to commodity prices.
I thought that we had learnt the lesson of the 1970s: it is not commodity prices that cause inflation, but Governments who cause inflation. If we looked at what happened with commodity prices in the 1970s, we would remember the hike in oil prices. That did not cause inflation. We have only to look at the comparative performance of the UK and German economies at that time.
In 1975, German inflation increased by 5.9 per cent. In the United Kingdom, it increased by 26 per cent. The following year, United Kingdom inflation went up by 16 per cent., whereas German inflation increased by only 4 per cent. Commodity prices cannot affect inflation unless Governments produce monetary policies that accommodate increases in commodity prices. I offer a word of caution to the Chancellor if he still believes that commodity prices can throw his inflation controls out of the window. It is essential for a responsible Government to have a firm monetary framework and for there to be an intelligent analysis of that framework.
My other area of concern in monetary policy is that the Governor of the Bank of England seems over-concerned about the level of sterling. At his meeting with the Chancellor on 5 May, one of his main reasons for wanting interest rates increased was his belief that sterling had weakened significantly, which could cause inflationary pressures.
I do not think that that is so, and I feel that what the Governor said in his previous meeting with the Chancellor on 5 April better describes the implications:
The fall in the exchange rate"—
that is, the fall in sterling—
was a side effect of the international exchange rate turbulence— the weakness of the dollar, or related to non-economic domestic factors".
To take too much notice of movements in sterling against a basket of currencies or against particular currencies at present would not be a sensible way in which to decide monetary policy. It is essential that we have a flexible

exchange rate, because British business is trading across the world and needs the right exchange rate with all its international trading partners, not just with one or two.
What the Chancellor does on monetary policy will be vital for our economic success. My hon. Friend the Member for Bridlington (Mr. Townend) set out an agenda for public expenditure reductions, and I hope that the new Chief Secretary to the Treasury will prove a ruthless cost cutter and deliver the savings in public expenditure that are required over the coming three or four months, so that we can reduce the level of taxation. I am sure that in that endeavour, the Chief Secretary will have the support of the Chancellor of the Exchequer and the Prime Minister.
In his November Budget, the Chancellor will have an opportunity to set out a programme of tax reform, and that will help to reinvigorate the Conservative party and to show that our policies are continuing to move forward. Capital gains tax is certainly one area in which reform must take place—indeed, an area in which reform could even achieve higher levels of tax revenue. But I would be more cautious about inheritance tax. We must also consider changes in reliefs, thresholds and personal allowances, so that those on whom tax increases have borne too heavily in recent years will have the prospect of some reduction in what they pay.

Mr. Barry Jones: I envied the speech by the hon. Member for Milton Keynes, South-West (Mr. Legg) for its certainties. He certainly fashioned some alibis for his Government. The Chancellor of the Exchequer made a speech of genial ruthlessness, but he had nothing to say, so he attacked his shadow. In contrast, my hon. Friend the Member for Dunfermline, East (Mr. Brown), the shadow Chancellor, spoke for the people of our country. I am glad that he called for investment in our industries and for the rescue of our social services.
There is a daunting agenda. First, 180,000 young people aged 16 and 17 are currently not in work, training or education. About 2.5 million of our fellow citizens are out of work, with little prospect of further meaningful work in their lives. At least 800,000 of our fellow citizens are classed as long-term unemployed. We have also seen the disappearance of apprenticeships.
Hundreds of thousands of our fellow citizens live in homes blighted by negative equity, and there are at least several hundred thousand council homes in desperate need of modernisation—the basic civilised essentials of modern windows and new doors—to make them at least warm and draught-proof. That is a blight on our society.
The Conservative Governments who have held office since 1979 have enjoyed the realisation of about £78 billion-worth of assets from privatisation—a colossal sum. They have also received about £120 billion-worth of North sea oil revenues. I cannot be the only person who finds it incredible to set all that treasure and wealth that Conservative Governments have received, those staggering sums, against the colossal scale of the problems in our society. Those problems are so colossal that we know that, even if there were a change of Government, they could not be righted in the new Government's first term.
A worse feature of the analysis is that about 2.5 million manufacturing jobs have disappeared since 1979. Real well-paid manufacturing jobs have been lost to our nation. We must acknowledge that Mrs. Thatcher, Sir Geoffrey Howe and Sir Keith Joseph decided on an industrial policy that allowed all those manufacturing jobs to go to the wall. We now know that our nation lacks the capacity of a truly broadly based set of manufacturing industries. That is a wounding reality, and it bodes ill for the next century. I do not think that we can criticise that troika of crazed ideologues too much for what they did to our manufacturing base.
My own priorities remain with aerospace and steel, and here I think I can claim the backing of the whole House. I shall speak in detail about one aerospace project—the airbus. More than 25,000 British people go to work on an airbus every day, and more than 300 British businesses are involved in the airbus project. There are 1,250 airbus airliners in service with 120 airlines throughout the world. Further orders, if they are realised, will be worth up to $52 billion. Furthermore, more than £1 billion a year is contributed by the airbus project, through British Aerospace plc, to the United Kingdom's balance of trade. That must be good.
I am proud of the fact that 2,300 of my constituents make the wings of the airbus—of every airbus—in my constituency. The Government must as a matter of urgency give British Aerospace grants for technological research, specifically for research and development in wing technology. I worry because, in Hamburg, there is now a factory assembling nothing but a variant marque of the airbus. It is clear to me that the Germans covet our wing technology expertise. They want to make wings, so it would help if the British Government gave British Aerospace those grants, by way of reward.
My other local industry is steel, and I acknowledge the work that the Government are doing to try to eliminate the cheating that goes on in some continental steel-producing countries. At the moment, British Steel plc is going great guns, and its profits are high. But everyone who knows steel knows that the day will come—sooner rather than later—when the cyclical trade in steel will dip, and dip horribly. Our British steel industry will then be hit, because our competitors on the continent are cheating by means of illegal subsidies for their steel companies.
We in Britain, in Wales and in my constituency have made enormous sacrifices, with de-manning and with the closure of steel mills. Having created what is arguably one of the world's finest steel industries—with brilliant production and quality—we should not have to suffer that kind of competition from the continent. I ask the Government to look carefully at the matter.
Time is short tonight, and I conclude by saying that I do not think that the Government have any strategic sense with regard to economic policy. It all seems to be tactical, short-term and hand-to-mouth, and that is not good enough for a nation facing major challenges. The Government never exhibit any sense of urgency in their plans related to large-scale unemployment, but such large-scale unemployment in the long term destroys the fabric of our society.
Nor do I see any convincing plans from the Cabinet or the Government for investing in our manufacturing industry in any meaningful way. There are no coherent plans to rescue the national health service from the problems it faces. There are no realistic plans to help our school services or to tackle homelessness. All the people of this country can do is hope that they will be able to vote urgently in a general election.

Mr. Nirj Joseph Deva: I am grateful for the opportunity to follow the hon. Member for Alyn and Deeside (Mr. Jones) and my hon. Friend the Member for Milton Keynes, South-West (Mr. Legg), who made a very technical speech. I would also like to congratulate my hon. Friends who are now assuming their Front-Bench duties for the first time. I wish them the very best.
When the country voted at the last general election, the Conservative party received the largest number of votes it or any other party had received in the history of British politics. When the country voted that day, we were in the midst of the worst recession in Europe, but still the country voted for us. It was not a mere act of faith, but an act of certainty in the ability of the Conservative party—and the Conservative party alone—to turn the country around. That expectation is now being met. The Government have delivered.
In 1992, when those votes were cast, the growth in the GDP was minus 0.5 per cent. Today it is 3.9 per cent., and rising. In 1992, when those votes were cast, interest rates were at 10.2 per cent. Today, they are at 6.7 per cent., and are steady. In 1992, when those votes were cast, inflation was at 4 per cent. Today, it is 3.5 per cent., and is below the European Union average.
In 1992, when those votes were cast, 660,000 people were out of work. Today, there are 660,000 more people in work and supporting their families. In each of the past 22 months, unemployment has fallen. In my constituency alone, unemployment has fallen by 100 per cent. compared with the same period last year. In 1992, when those votes were cast, industrial production was growing at minus 0.1 per cent. Today, it is growing at a phenomenal 5 per cent. a year. In 1992, when those votes were cast, the balance of payments was £10 billion in red. Today, we are beginning to achieve something that has not been achieved since 1984—a balance of payments surplus.
No wonder the Labour party is in a panic, and is hiding behind its leader's sanguine smile. Labour Members are collectively paddling half under the water to stay afloat. The Labour party must acknowledge that it has tried to borrow the Government's policies as its own. I know that imitation is the sincerest form of flattery, and no one— least of all the Labour party—can deny that the party is imitating the Conservative party in all aspects bar one or two, such as its belief in the social chapter and the minimum wage.
Why is the Labour party attempting to steal our clothes if they are ill-suited to the country? Why is the Labour leader discovering every day a new Labour policy which is, in truth, an old Conservative policy? We are flattered by the imitation, and heartened by the confidence that the Labour party has placed in our policies.
We must look at the Government's record to understand the enormity of their success in turning the country around since the general election. No wonder the Labour party is trying to imitate us. Imitate us, by all means—but the more it imitates us, the more it flatters us, and the more it flatters us, the more the country will understand that it will be better to vote for the tutor at the next election rather than the new student. We are old hands at managing the economy well.
Labour's record of economic mismanagement during its entire history has been utterly disastrous, and it has been disastrous because one cannot teach an old dog new tricks. One can try, but in the end it reverts to its own traditions. Each party has an imbued culture, an underlying foundation, and its own ethos and values—in the case of the Labour party, it is pervasive socialism which, try as it might, will never go away.
Along with that all-pervasive socialism comes the desire to intervene, which is a polite word for meddle. The Labour party wants to meddle in people's lives, in how they spend their money, in how they should run their business, in how they educate their children, and in how they support their families. That old desire to meddle and the belief that the Labour party "knows what is good for you" comes from the party's socialist roots. That is why the Labour party is socialist.
Without that need to meddle, and without its socialist roots, the party will be left without a philosophy. Without a philosophy, it will be nothing as a party. It will believe in nothing and will stand for nothing, other than to get power. It will then become nothing—the ultimate nihilistic experience. The party will implode upon itself, smiling sanguinely and with a stiff upper lip to the last behind its languid leader.
Original thinking, like original sin, is unbecoming in the modern Labour party, as the party's modernity is entirely based on its unoriginality. The modern Labour party does not think, it copies. The modern Labour party does not innovate or develop, it merely reflects—like a large cracked mirror—our policies. That is a sad state of affairs.
Perhaps I am being a trifle unfair. The shadow Chancellor, who I notice has left the Chamber, is an original thinker. Last year, in a moment of weakness, the hon. Gentleman thought of something original, which, like a golden egg, dropped on his entire unthinking party. He developed a new economic theory, and called it the endogenous growth theory of the economy. His theory was particularly concerned with investment, a subject about which the hon. Gentleman spoke this afternoon.
In a number of pronouncements, the shadow Chancellor has made his suspicions of the work of business operating in a free economy quite clear. He has said:
The British free market without effective intervention, has proved to be a static, brittle and second rate model of economic development because people do not have the tools to plan and invest for the future … To summarise, crude free market dogma has failed because it does not encourage long term relations and commitments and therefore gives no incentive for people to invest for the future".
As a result, the shadow Chancellor has stated:
without co-ordinated action we cannot expect to see the kind of investment in industry and in skills and in infrastructure that we need".
Instead of trusting businesses to invest, Labour's version of the endogenous growth theory makes the state the key player in undertaking investment decisions,

camouflaging nice-sounding, well-meaning rhetoric on the mechanics of how the Government should intervene directly in the investment process. Yet without the appropriate knowledge of commercial discipline, that cannot be meaningful. Alienated from justifiable economic stimuli, it will serve only to produce less investment, and lower-quality investment.
A specific method of economic and industrial control has been unveiled, involving widespread Government oversight of the economic process. Let us take some of the specific proposals with which the Labour party has threatened us, such as on companies' relationships with other companies.
The Labour party says that a beneficial influence is to be exerted in terms of industrial companies allocating decisions. It says that the state is to influence from whom companies buy, to whom they sell and how they relate to each other over the long term. Have you, Mr. Deputy Speaker, heard of anything so preposterous? The state will tell companies and their boards who to buy from, who to sell to and how to market their products.
On the allocation of companies' investment funds, the Labour party says that the state is to be involved in the type of investment undertaken. Regardless of the needs of the individual business, the Government are to involve themselves in whether a company invests in plant, machinery, advertising, marketing or research.
If the Labour party were elected, which I do not think it will be, we could look forward to a period in which the state—the shadow Chancellor and his team—informed company boards that growth would be better stimulated if they took their £100,000 and invested it in new plant or machinery rather than spending it on an advertising or marketing campaign, or even on a new carpet.
The Labour party says that the state should be directly involved in how firms handle and invest in their employees. On training—

Mr. Deputy Speaker (Mr. Michael Morris): Order. The hon. Gentleman's time is up. I call Mr. Jim Cunningham.

Mr. Jim Cunningham: I was interested in the remarks of the hon. Member for Milton Keynes, South-West (Mr. Legg), as he is the only Conservative Member who has tried to be honest about the economy. The Treasury has admitted what everyone already knows—that the recovery is slowing down, and that Britain is at the back of the class of industrialised countries on competitiveness. It is now known that, during the period 1979–94, the economy grew at an average rate of 1.7 per cent. per annum. That is the slowest period of growth in this country since 1945.
More shocking still, wages and salaries have been reduced to their lowest share of GDP since the second world war. They went down from 66 per cent. of GDP in the second quarter of 1979 to 62.7 per cent. in the fourth quarter of 1994. Manufacturing output has also received a hammering. In 1993, it was less than 1 per cent. higher than it was in 1973. But what really gives the lie to the Conservative "economic miracle" is that, of all the G7 countries, the UK had the lowest average export growth, at 2.9 per cent. Together with Germany, the UK has the


highest imports among the G7 states, at 26.3 per cent. All those statistics are indictments of the Conservative party's record.
To really appreciate the effect of current policies, one must look at how my constituency has been devastated. Rolls-Royce and GPT have shed about 18,000 jobs in the past 10 years, which shows the magnitude of what has happened in my constituency and other parts of Coventry. The region suffers from poor transport links, which will only be exacerbated by rail privatisation and inadequate plans for the west coast rail link. Large manufacturers have been shedding jobs, causing Coventry's dole queues to rise above the regional average.
People should not forget when they make comparisons that, at one time, Coventry was known as a boom city. The decimation of the manufacturing industry has hit Coventry particularly harshly. One in three of the region's work force are in manufacturing, compared with one in five nationally. The subsequent job losses have created more long-term unemployed people in Coventry than even in Warwickshire.
It is not just the manufacturing sector that has been hurt. The service sector is expected to lose more jobs later this decade. The virtual end of the British coal industry has affected many people in Coventry and north Warwickshire. It is widely recognised that, due in no small measure to the recession and the slow faltering of the so-called recovery, investment in town centres has been slow.
The Government have shifted their excuses for the catastrophic fumbling of the economy, while the dole queues have lengthened and unemployment has more than doubled from just over 1 million in 1979. The labour force survey report shows that 734,000 people are working part-time as they cannot find a full-time job. That should be seen against a background of more than 1 million people earning less than £2.50 an hour. Women have been especially hit by the economic climate. Some 670,000 women earn less than £2.50 an hour.
The "Summer Economic Forecast" that has been laid before us does not show that things will change. On the contrary, the document acknowledges that the rut has been created for us by the Conservative party. Manufacturing industry has borne the brunt of two Tory recessions, as can be vividly witnessed in Coventry. Investment in industry, infrastructure and people are the keys to re-establishing a fragile economy. While extolling the virtues of investment, the "Summer Economic Forecast", however, reports that 1995 will not see as large a rise in business investment as expected.
The Treasury has also declared that total fixed investment is likely to be less than business investment. With growing under-investment, it should not be surprising that Britain has suffered. In May, excluding oil and erratic items for non-EC trade, Britain's volume of exports fell by 2 per cent., while imports rose by 5.5 per cent. The Central Statistical Office has even suggested that the non-EC visible trade deficit is widening. There has been a domino effect as money flows abroad. The net external assets of this country have been diminished, from £17.7 billion at the end of 1994 to £8.2 billion in the first quarter of this year.
Labour has imaginatively put forward an exciting strategy of investment and partnership with industry, and has recognised changing work practices in the run-up to the 21st century. It has also acknowledged the inventiveness and talent of the British people, and has been discussing its proposals with the trade unions and businesses. The Tories, through their shenanigans in a split ribbon leadership race, wiped £10 billion off share prices, which sums up Conservative economic mismanagement.
The Government should listen to the Labour party's proposals. Instead, we have seen clashes between the Chancellor and the Governor of the Bank of England. Labour would make the Bank of England more accountable to Parliament via a statutory framework, as my hon. Friend the Member for Dunfermline, East (Mr. Brown) outlined today.
The rules governing private sector participation in the affairs of the state are in dire need of an overhaul. They need to be amended so that companies would not necessarily recoup all their costs at the point of use. The rules should consider not just cost-effectiveness but social benefits to the community.
The Treasury is also confused in its handling of leases. For example, a 20-year lease costing £200 million but repaid at £10 million a year would be counted against the external financing limit of the £200 million in the lease's first year. Clearly, it should be viewed as £10 million against the external financing limit in the lease's first year.
Most fundamentally, Labour will institute a decade of investment, as compared with a decade of negligence. One way to encourage investment in industry would be to establish an investment in industry unit at the Department of Trade and Industry. In an impact statement, each Government Department should declare how each of its policies would affect industry. The small loans guarantee scheme should be extended. Other measures could include a moratorium law for the courts to attempt to save companies from bankruptcy—not dissimilar to what happens in America.
Those and other proposals are being considered by the Labour party. All we hear from the Government is the tired old statement that has wrecked our economy—the iceberg of blind ideology.

Mr. Matthew Carrington: I apologise to the House for missing most of the earlier part of the debate because I was stuck upstairs in a statutory instruments Committee that went on longer than most of us who were on the Committee expected.
It is sad that I missed the first half of the debate, because I understand that the opening speeches were worth hearing, and especially that the speech of my right hon. and learned Friend the Chancellor of the Exchequer was one to treasure. He laid bare and exposed the policies of the Labour party most effectively, and I am sure that that approach will be carried forward for the next 18 months to two years and will become stronger and stronger.
I welcome to the Treasury Bench my hon. Friend the Member for Erewash (Mrs. Knight), and congratulate her on her appointment, which delights us and all her friends on the Conservative Benches. We look forward to great things from her.
I am especially pleased to have an opportunity to speak in the debate, because the summer economic forecast shows an economy that is in extremely good shape. It is in rather better shape than the country's economy has been, perhaps, since the end of the second world war.
The economy is doing very well indeed in a great many sectors. Unquestionably, there are problems in the economy, but even the apparent problems are in reality strengths. We are witnessing a decline in economic growth, but it is a decline from 4 per cent., which is historically in our economy a very high level, to a much more sustainable level of about 3 per cent. That is to be greatly welcomed, because it means that our recovery from the recession can be continued in a way that will allow the recovery to strengthen, broaden and deepen throughout the economy.
The continuing low retail sales are in many ways a serious problem for our economy. Many parts of industry suffer badly as a result—those that rely heavily on domestic sales. Low retail sales are a serious problem, but they have the advantage of avoiding what has always killed our economy in the past when recovering from recessions—an import boom, a massive sucking in of imports, which has destroyed the balance of payments in the past and caused us so many difficulties. A cautious return of growth in retail sales is therefore to be welcomed.
We should not be overly worried about depressed house prices; they will cure themselves with time, as they already are. The great problem of house prices increasing far too rapidly has beset us in the past and blown our economy right off course, most notably in the boom of 1986 and 1987, when the growth in house prices was largely responsible for the crash that came afterwards. We should therefore all greatly welcome the continuing low growth in house prices.
One of our great strengths is exports. As was said earlier, the increase in export volumes that has taken place—and there is every sign that that increase will continue to be sustained at high growth rates—is something that we have not previously witnessed in this country when coming out of recession. That is extremely positive, and it allows us to hope that this time, our recovery will be sustainable. It offers the opportunity for the next downturn in the economy, when it comes—in economic cycles there is inevitably a downturn—to be mitigated by the strength of our exports and our external market, which is extremely healthy.
Perhaps the biggest problem is inflation. Although inflation is low, it is projected to increase. It is increasing, admittedly, from a low base, which is encouraging, but inflation is the danger in our economy, and that is what we must watch.
I was very pleased to notice in the economic forecast that, after having increased, inflation is projected to decline sharply to an underlying rate of about 2.5 per cent. Inevitably, in the forecast there is no indication of the way in which that decline will be achieved, because the Government, wisely and rightly, give no estimates as to future movements in interest rates.
I hope that it will be possible to avoid a sharp increase in interest rates to control inflation, but in my opinion it is more important to maintain a low inflation rate than to worry about maintaining a low interest rate. We need to take whatever measures are necessary to get the inflation

rate under control and to achieve the target of getting back down closer to 2.5 per cent. to 2 per cent. That should be a major objective in economic policy.
However, hope remains that it will not be necessary to increase interest rates to do that. There are signs that the inflationary pressures in the economy are not great and that, in the external economy, if anything, interest rate movements in the United States and Japan will allow us to weather the current inflationary storm. I rather agree with my hon. Friend the Member for Bridlington (Mr. Townend) that, by watching the economic figures during the summer, and certainly through the second and perhaps the third quarter, before doing anything precipitate on interest rates, it may be possible to avoid any increase in interest rates.
One problem will need to be tackled; as things stand, we need to boost the domestic economy. We need to find some way of spreading that recovery from the recession so that it benefits more people. We have heard in many speeches this afternoon about the difficulties that confront the domestic industries in our country. Those industries need to benefit eventually from the recovery, and the sooner the better. To do so, we need to put more money into people's pockets in the right way, and slowly.
There is a strong case to be made for gently encouraging the domestic market to recover. The best way of doing that is by increasing people's disposable earnings. The most effective way of doing that is by reducing taxation, and by reducing direct taxation. I wish to encourage my right hon. Friend the Chief Secretary and my hon. Friend the Economic Secretary to consider seriously ways in which direct taxation may be reduced in the next Budget.
However, it is obvious from the economic forecast that, on the face of it, there is no scope for reducing taxation. Indeed we are witnessing, in the projections of public sector borrowing, a slight increase in the anticipated amount of borrowing this year and an increase in the anticipated amount of borrowing next year, neither of which shows any flexibility to allow for a reduction in taxation. Therefore reductions in taxation must come from a serious review of the public expenditure.
I wish to encourage a rigorous look at public expenditure, because there must be scope for finding substantial reductions in public expenditure, which can then be translated into returning money to people's pockets to spend as they choose, to encourage domestic industries to grow and expand. That is a desirable objective socially and economically, and it must be done sooner rather than later.
The question also arises whether that is best done in income tax cuts or in changes to capital taxes. There is a strong case to be made for changing capital tax, whether it be capital gains tax or inheritance tax, to encourage savings in the economy.
The summer economic forecast reveals that the savings ratio is decreasing and industrial investment, although it is projected to increase quite sharply in this forecast, is showing a marked decline on what was anticipated in the Budget forecast in the Red Book. There is therefore a strong case to be made for encouraging savings, and, in addition to some reduction in income tax, I should like steps to be taken towards reforming the taxation of capital, especially capital gains tax.
We have a strong economy that is going in the right direction and we need to ensure that that progress continues. As a Government, we must not—

Mr. Deputy Speaker: Order. The hon. Gentleman's time has expired.

Mrs. Helen Liddell: My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), who is a very distinguished and experienced parliamentarian, made one of the most perceptive remarks to be heard in tonight's debate. He drew attention to the importance of economic debates and the significance that the country attaches to them, while also drawing attention to the paucity of such debates in this Chamber.
That caused me to reflect, as a much less experienced Member of Parliament, on the fact that the Chancellor of the Exchequer had an opportunity to come to the House today and give a reasoned and detailed explanation of the Treasury summer forecast. He missed that opportunity, and all we got was bluster and theatricality. That does not serve the House or the nation well. We expect better from someone who holds one of the highest offices in the land.
The Chancellor had an opportunity today to tell us why the Treasury summer forecast differs so markedly from last year's Budget. He had an opportunity to explain why the Treasury has revised down its forecast of overall growth in the economy. Gross domestic product in 1995 is estimated to fall from the Budget forecast of 3.25 per cent. to 3 per cent. in the summer forecast. The people of this country are concerned about economic growth; it is an integral part of their lives.
My hon. Friend the Member for Ashfield (Mr. Hoon) pointed out that, in the period from 1979 to 1993, this country has had the slowest rate of economic growth of the 18 countries of the European Community and the G7 nations. A number of Conservative Members referred to an increase in forecast inflation. My hon. Friend the Member for Dunfermline, East (Mr. Brown) pointed to the significantly higher estimates of public sector borrowing requirement.
We are elected, Opposition and Government Members alike, as custodians of this country, its legislative framework and its economic performance. That is key to our future and it is why we, as politicians, have a very low standing in the community. The Government have not fostered an environment in which investment can improve. They are selling out our future.
The low levels of investment in both the public and private sectors—I do not turn repeatedly to the public sector as a panacea for all ills—are selling out this country's future. I do not spend a lot of time playing with a fancy electronic organiser that will tell me what the next day is or when I can expect my husband to take me to dinner. I do not mark down dates in my diary and 1 January 2000 does not mean all that much to me—except I suspect that it will be a rather more alcoholic Hogmanay than usual.
On that subject, I hope that by then we will have a Labour Chancellor who recognises that one cannot take policy decisions based on pique. The whisky industry in my constituency has suffered directly as a consequence of

the Conservatives' pique. When they were defeated on the issue of value added tax on fuel, the duty on whisky was increased. As a consequence, we have seen a reduction in revenue to the Exchequer from that industry as well as a reduction in the industry's prospects.
Levels of investment are critical. Inward investment is important to my area. For many years, Scotland has depended on high levels of inward investment. My hon. Friend the Member for Dunfermline, East referred to the opportunities that come from the globalisation of the economy and from increasing technological advances. We have an opportunity to attract companies that are mobile and can invest in this or any other country. Yet we often lose that opportunity, just as we are losing other opportunities that we should seize.
Let us consider, Mr. Deputy Speaker, that you and I are economic strategists for a multinational company which could choose to establish a business in any country in the world. Would it choose to come to Britain when it does not know what is the Government's policy on the exchange rate and when it does not know whether there are one or two Conservative parties on the issue of a single currency? How can businesses plan for the future and view this country as a potential site for industrial investment if the Government are not confident about where they are going and about their long-term future?
The Government have repeatedly been thrown off course. They are committed to short-termism and the Chancellor and his colleagues on the Back Benches have already begun to consider, with some anxiety, their prospects at the next election and the way in which they can use and abuse the economy to secure their re-election. I do not believe that the people are foolish enough to fall for that.
My constituents would have been interested to learn today why 734,000 more people are working part time and cannot find full-time work. Why has the number of temporary employees in industry increased by 30 per cent? Why has the number of those in employment fallen by 14,000 in the first quarter of this year? My constituents and those of every hon. Member in the House—there are more than 650 of us—want to know why they feel insecure at work. The Chancellor's speech has not prompted us to explain to our constituents that the Government are in control and have the country's long-term interests at heart.
My speaking time is short. Most hon. Members have been fairly restrained in their remarks and I will try to do the same. I am very interested in the future of small firms in my constituency. More than 90 per cent. of people in the country work for small firms; it is a fallacy to believe that everyone works for the ICIs and the Marks and Spencers. It is the small firms sector that is most troubled about the future. Some 40 per cent. of those involved in small firms who were polled in a recent Daily Telegraph survey said that they did not believe that the country had come out of recession. People in small firms are at the sharp end.
I commend those Conservative Members who referred to what is happening in the retail industry. My constituency used to comprise market towns. When I walk down South Bridge street, the main street in the major town in my constituency where as a child I was taken to buy my Sunday outfit, all I find now are discount stores and empty shops. People have lost confidence in the Government. I do not seek to make a partisan point when


I say that the people are entitled to turn to the Chancellor of the Exchequer and expect answers, not bluster. What we had tonight was bluster and also complacency from a number of Conservative Members.
We cannot be complacent about the country's economic performance and economic future. We have a responsibility to take these debates extremely seriously and to show that we are committed to ensuring the country's future economic growth. We must make sure that the Government are considering some of the existing fundamental problems in the economy.
I do not believe that every economic problem is caused by the Government. However, some honesty and some rational argument on the part of the Chancellor about the nature of the problems that we face would allow people to go forward in partnership. Confidence among our business sector would increase, as would the hope and confidence of those people who fear unemployment. Some 65 per cent. of people fear unemployment and feel insecure in their jobs. Given the events of the past couple of weeks, I would have thought that there was one man who, more than any other, would understand how it feels to be insecure in one's job: the Chancellor of the Exchequer.

Mr. Nicholas Budgen: The hon. Member for Monklands, East (Mrs. Liddell) represents a considerable strand of the Labour party. She is fluent, she has an attractive way of addressing problems, she has confidence and vigour, and she plainly addresses herself to that great body of those in the private sector who are temporarily disenchanted with the Government.
They look at the policies of new Labour and they say to themselves, "This is splendid. It is a new, reinvigorated Labour party and we can vote for it and have all the advantages of a new form of Conservative Government." They say to themselves, "Here is a smart, young public school boy with his attractive and very successful wife at the Bar. He is just the sort of person that we in Hampstead or Tettenhall feel most comfortable with." They then say, "While we respond to those arguments, what are the principles and the policies of the Government?"
It is true that, after 16 years, there have been some changes. It is instructive for all those outside the Chamber who believe that they can have a Labour Government without substantial changes to read the debate. It is important to examine not just the principles and the policies, but the prejudices of the two great parties. Those prejudices have been eloquently demonstrated in today's debate.
Conservative Members have, by and large, expressed support for my right hon. and learned Friend the Chancellor of the Exchequer. We believe that economic policy is now settled and successful. We have had some discussions about the minutiae of monetary policy, but the persistent theme is the need to cut public expenditure. We admit that it is jolly difficult to cut public expenditure, even when the prejudices of our party are in favour of it.
My hon. Friend the Member for Bridlington (Mr. Townend), as always and rightly, put the need for specific cuts in public expenditure in the first paragraph of his speech. My hon. Friend the Member for Fulham (Mr. Carrington) supported the way in which economic policy

is proceeding at present, but he too was looking for cuts in public expenditure. That is a proper expression of Tory prejudice. Yet, in spite of those prejudices, it is extremely difficult to contain public expenditure, and our public expenditure has risen too much.
New Labour, however, offers all the attractive features of Conservative economic policy, but people should listen to the speeches by Labour Members this afternoon. Every time a speech makes recommendations on how the economy could be improved, massive amounts of public expenditure are involved. The public school boys leading the Labour party will say, "Oh no, that is only old Labour. The right hon. Member for Chesterfield (Mr. Benn) is completely out of touch with everything that is happening, but we have younger, smarter, cleverer people and we don't want massive amounts of public expenditure." But we have only to look at the speeches made this afternoon.
The hon. Member for Ashfield (Mr. Hoon) produced a massive catalogue of suggestions for increases in public expenditure. He is an important figure on the Labour Front Bench who is thought to be modern, new, intelligent and well educated Labour, well away from the trade unions, but he gave us a massive catalogue of expensive promises.
The hon. Member for Birmingham, Hodge Hill (Mr. Davis) is solid, decent and moderate. What was his prescription for improving the economy? It was spend, spend, spend. The hon. Member for Alyn and Deeside (Mr. Jones) is not one of the right hon. Member for Chesterfield's wild men with roving eyes and a mad look, but another decent, sound man who might be in middle management anywhere, but yet again he makes further suggestions for increasing public expenditure. Those solid citizens that would support a Labour Administration would ask for more public expenditure.
I am glad that the hon. Member for Wolverhampton, North-East (Mr. Purchase) is here. I gave him notice that I would mention him. I have watched him and his colleague the hon. Member for Wolverhampton, South-East (Mr. Turner) these past 10 years as they have been councillors in Wolverhampton and then Members of Parliament. Every time there is a suggestion for closing a hospital or moving facilities elsewhere, they ask for more public expenditure. They want more public expenditure for general practitioners and they are extremely good at supporting middle-class claims for extra public expenditure. When the lawyers complain, they want more money for legal aid. Whenever there is a suggestion for more public expenditure, along come those solid citizens representing new Labour—the soft, decent face of a Labour party that can give the country Conservatism under a different name.
The prejudices of our parties are quite different. The Conservative party wishes to reduce the size of the state; we want to reduce public expenditure, because that is the only safe way to reduce taxation and the only way to keep interest rates down.
The Labour party should realise that it cannot reintroduce exchange controls or any form of capital control. It will have to borrow money from the global pool of capital. If it comes to power, those solid citizens will put pressure on the fresh-faced public school boy and we shall be back to the old story of an enormous public sector borrowing requirement, higher taxes and higher interest rates, and there will be no difference whatsoever


in substance between the fresh-faced public school boy and all the old chaps who are in favour of old Labour and the nostrums of the right hon. Member for Chesterfield.

Mr. Alan Milburn: We have heard in the debate a tale of two Britains. We have heard the official version from the Chancellor of the Exchequer earlier today, who described a Britain on the up—a Britain where everything is improving dramatically and insecurity and unemployment are about to become things of the past. At one point, I thought that the Chancellor was about to follow his predecessor by using a gardening metaphor. Hon. Members will remember those famous green shoots of recovery. I thought that the present Chancellor was about to talk about everything coming up roses.
Like the previous Chancellor, the right hon. and learned Gentleman will quickly find that the public simply do not believe that message of optimism because it jars against the other Britain—the real Britain, where, unfortunately, confidence is low, pessimism is high and insecurity in the job and housing market is the order of the day. It is the Britain where middle and low-income families face record tax bills and ordinary families are paying more for less— more tax for fewer services. It is a Britain where millions of home owners have lived through more than five years of crisis in recession, debt and repossession. As the debate takes place, more than 1 million home owners remain trapped in negative equity.
A Government committed to the home owner would seek to create the conditions in which the insecurities, doubts and lack of confidence in the private housing market were removed. The Government's approach is clearly driven by an understandable fear of a lurch back into the bad old boom-bust cycles, for which they were largely responsible and which they wish to avoid again. I understand that fear. They are right to be fearful but are wrong not to recognise the fact that the economic circumstances of the 1990s are very different from those of the 1980s. The danger in the present situation is not that a recovery in the housing market will inevitably set up a damaging inflationary spiral but rather that a lack of recovery in the housing market will dampen prospects for the economy as a whole.
The Government have a responsibility to carry out the promises and pledges that they made to home owners. They can do that quite simply tonight. The new Chief Secretary to the Treasury, when he winds up in an hour or so, can tell the House that he will recommend to the Secretary of State for Social Security that he drop the proposal to remove benefits from unemployed home owners. The Chief Secretary can say that he will review the additional tax burdens that ordinary home owners face, as a result of the fact that, between January of last year and October of this year, repayment costs on an average home have risen by more than £800, because of interest rate rises, two cuts in mortgage interest relief at source—MIRAS—and the cost of private mortgage insurance.
I recognise that the insecurity in the housing market springs from something deeper than mistrust of the Conservative party. It springs from a growing insecurity in the jobs market and growing economic insecurity in

general. In essence, insecurity will remain as long as doubts remain about the prospects for long-term growth in the British economy. Here, as the summer forecast itself bears out, the prospects are rather less rosy. Economic growth, as my hon. Friend the Member for Monklands, East (Mrs. Liddell) said a moment ago, has been cut from 3.25 to 3 per cent.
Nor are the prospects for future sustainable growth any more favourable. Labour Members have consistently argued that the economy requires higher levels of investment for sustainable growth to avoid the boom and the bust, as growth is inevitably derailed by accelerating inflation. Yet in the summer forecast, business investment has been halved from 10.75 per cent., as it was in the Budget just a few months ago, to 4.75 per cent.
Many hon. Members will have read the Bank of England's inflation report and will have noted in the February edition the warning, which I hope that we will all take seriously, that, already,
Capacity constraints are becoming widespread in industry … This will increase inflationary risks unless productive capacity increases.
Already, the fragile economic recovery that we are seeing is running into all the old problems of capacity constraints, investment gaps and skills shortages—skills shortages when more than 2 million people are officially unemployed. The low capacity of our economy is the main reason why unemployment remains so high and our trade deficit is so large, and is the root cause of rising taxes and high unemployment.
Unless those underlying weaknesses in the British economy are tackled, Britain's relative economic decline will continue through the latter part of this century and into the next. That failure to invest in capacity, whether it is physical or human, lies at the heart of Britain's inflation and its slow growth problems. The result is that, unfortunately, Britain has a sluggish rather than a dynamic market economy. That reflects a failed model of Government: the deregulation dogma, cuts in investment in skills and infrastructure.
Cuts have been made in investment in training at the very time when so many people are out of work and are crying out for an opportunity to gain entry to the labour market. That reflects the failure to see that it is necessary to develop long-term partnerships to improve economic performance. Partnership—between Government and the private sector, and between companies, shareholders and workers—is the model for progress.
Investment is the key to future economic success. Without investment, Britain will not only remain in the slow lane of the global economy, but will remain a country divided. Again, there is a tale of two Britains: prosperity for the few, insecurity for the many, and unemployment and low pay scarring the prospects for all. Britain is locked in a vicious cycle of poverty, rising inequality and economic failure.
It used to be said in the 1980s, when we heard much of the economic miracle, that trickle-down economics would provide the basis for sustainable growth, that they would work, and that cuts in the top rate of tax would mean that those at the bottom would find gainful employment. There has been no economic miracle. There has been an economic disaster. Just a week or so ago, the former Welsh Secretary coined the phrase, "No change, no chance." He was right in more ways than one, because


the summer forecast and all that the Chancellor had to say this afternoon represented no change—no change in policy, no change in direction.
We could be rubbing our hands with glee at the prospects—or rather the lack of them—that arise for the Conservative party from that lack of change in direction, but what worries me is not the life chances of Conservative Members of Parliament but the life chances of the people of this country. The real lesson to take from the economic forecast is that, without a change in Government, life chances will not improve for the majority of people.

Mr. David Tredinnick: I congratulate my right hon. Friend the Member for Bristol, West (Mr. Waldegrave) on his appointment as Chief Secretary to the Treasury and wish him well in the future as he considers the budgets of the great Departments of State.
I have always believed that we would win the next general election. I have listened to speeches from Opposition Members this evening and am more convinced of that than ever before. My hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen) referred to the speech made by the hon. Member for Ashfield (Mr. Hoon) and to the huge shopping list. The realisation of the bills that will have to be met by an incoming Labour Government will, I believe, frighten voters. Secondly, there will be a recognition that the Conservative Government have moved the country from recession to recovery, and that they have done so at a time of the deepest worldwide recession since the 1920s.
I was struck yesterday, when listening to Opposition Members posing questions on education and employment, by what an uphill struggle the Opposition will have because of the way in which the statistics are changing. How difficult it is for one to mount an effective attack when the statistics are against one.
The hon. Member for Birmingham, Hodge Hill (Mr. Davis) focused his speech tonight on unemployment and said that it was a key factor. Yet all the statistics relating to unemployment and the creation of jobs, are moving in favour of the Government. Unemployment has fallen by nearly 700,000 since its peak in December 1992, and the number of people joining the unemployment register in May was the lowest for five years.
It is hard to attack the Government when the number of people in employment has risen by more than 400,000 to about 25.5 million since the recovery began; and it is hard to attack the Government when redundancies are down to half the level that they were a year ago. It is also hard to attack the Government when, over the three months to May, the number of people out of work for a year or more fell by 40,000 and the number of people employed in manufacturing industry is on the rise.
When I listen to some Opposition Members, I really think that we are living in different worlds. [Interruption.] We have heard the theme of the tale of two cities from the Opposition this evening, but with such improvements in the economy, it is hardly surprising that the Opposition made so little headway yesterday.
It is in part due to the success of our economic policies that the Conservative party is now recovering in the polls. [Interruption.] The most recent polls show us recovering, but Opposition Members do not like to hear that. The

recovery is also due to the Opposition's failure to present credible costed policies. That was the problem faced this evening by the hon. Member for Dunfermline, East (Mr. Brown). They are not helped when the Leader of the Opposition appears to have begun to distance himself from one of their key policies, the minimum wage, saying that he wants to leave it to the unions to negotiate rather than coming up with a figure.
Perhaps that is why the stock market has surged recently. That is further evidence of economic recovery, although, judging by the speech made by the hon. Member for Coventry, South-East (Mr. Cunningham), he may not have noticed it. However, the key factor in boosting the stock market, which is an illustration of people's confidence, is the fact that my right hon. Friend the Prime Minister has been re-elected with a greater majority than the leader of the Labour party achieved in his election. [Interruption.] Hon. Members do not like to hear it, but it is true.
I welcome the summer economic forecast. I quite understand why growth has to come down slightly if we are to keep inflation within a figure which will enable us to compete internationally. I welcome the target of 2 per cent. of GDP for the PSBR for 1996–97 and the need to keep tight control. Growth is what we need and will get. Some Opposition Members may give us credit for the fact that unemployment in France is twice that per capita in Britain, and France has yet to begin to reconstruct some of its state industries.
I come now to the area that I represent—the middle of England, the east midlands. Manufacturing in the east midlands has performed strongly in recent years and its share of regional GDP at 29 per cent. is higher than anywhere else in the country. Output is up 32 per cent. over the past decade. If we have a problem, it is that not enough inward investment into Britain is going to the east midlands. That is something which I hope that the Government will address.
That the east midlands is doing so well is in part due to Toyota's huge new plant near Derby. When I was parliamentary private secretary to the Minister of State, Welsh Office, I visited that plant, on behalf of the Welsh Office, on its opening. It is a wonderful plant, which has had a large impact on the east midlands, in particular stimulating the trend towards exports.
My hon. Friend the Member for Bridlington (Mr. Townend) referred to the fact that this is the first time that he has seen an export-led recovery. My hon. Friend the Member for Fulham (Mr. Carrington) talked about the importance of the export-led recovery possibly shielding us against a downturn in the future. We listened to the shopping list of the hon. Member for Ashfield, but I was surprised to hear him say that the export-led economy is not helping the domestic economy. If that is the case, he certainly has not visited my constituency. The success of specialised companies there and in other parts of Leicestershire has played an important part in rejuvenating the local economy.
For example, Nelson Burgess in Hinckley, which makes massive industrial exhaust systems, has doubled its work force on the basis of export orders. Intertech has received a £31 million order from Nigeria for radio equipment. Another company which is well known to everybody, Caterpillar (UK) at Desford, has just received the Queen's award for industry for exports. That is why unemployment in my constituency is down from 4.1 per


cent. to 3.8 per cent. I am very surprised that the hon. Member for Ashfield can say that exports have no bearing on the domestic economy.
The hon. Member for Dunfermline, East referred to the importance of training. He suggested that we were taking no notice of training, whereas my right hon. Friend the Prime Minister and his Ministers have a firm policy on training. That has been an excellent area of growth in my constituency in recent months. At an award ceremony in my constituency, 12 firms received the training for excellence award.
My right hon. Friend the Chief Secretary to the Treasury should not be put off by what is said by Opposition Members. Our policies are working. It is much more important to get right the fundamentals in the economy so that we can compete internationally in order to generate the revenue that we can spend on training rather than going to the IMF and borrowing the money, which would mean putting up interest rates and return us to the old vicious cycle.
My right hon. and learned Friend the Chancellor said that this is the best country in the European Union in which to invest, and it is, and that is because of my right hon. and learned Friend's policies. As my right hon. and learned Friend approaches his next Budget, he should address three issues. I accept that we have problems with the housing market. In Leicestershire, the problems are to be found in the middle range rather than at the bottom or the top of the market. We also need to consider the problems of the married couples' allowance. Finally, if it is a matter of income tax or interest rate reductions, I would urge my right hon. and learned Friend to reduce interest rates first.

Mr. Malcolm Chisholm: Opposition Members are relieved this week to get away from the irrelevant leadership escapism of the rabble on the Conservative Benches and face up to the reality that confronts our constituents—the growing inequality and insecurity that we debated on Monday, and the economic failure that underlies that which we are debating today. Even this week, I cannot give too many marks to the Chancellor for facing up to reality, because what he displayed today was a mixture of hypocrisy, brass neck and election babble, which will deceive no one in the country and possibly not even himself.
I start with the four indicators that the Government chose to highlight in the motion of which they are so proud—growth, exports, inflation and borrowing. It takes brass neck for them to boast about growth with the all-time low record of 1.7 per cent. since 1979, below that in the other G7 countries. Of course, the figure sometimes has to creep up to compensate for the recessions that the Government create, but even this year they will struggle to manage growth of 3 per cent. The manufacturing output figures released this week put that in question, as does the total failure of investment to take off in the economy.
The Government are, perhaps, proudest of exports. Again, what a nerve they have. Their record of export growth is the lowest in the European Union. The export growth that they achieved last year resulted, in fact, from the failure of their economic policy: it happened only

because of devaluation. That 8 per cent. figure was just in line with the world average, as an 8 per cent. expansion of world trade took place last year. Other countries that devalued their currencies enjoyed greater export growth; the figure was 9 per cent. in Italy and 17 per cent. in Sweden.
What about borrowing? Well, if it reaches £50 billion, of course it must come down; but the significant aspect of the summer forecast is that it is revised upwards. At no point in the current economic cycle will the Government conform with the golden rule, and most commentators are now saying that there is no economic argument for tax cuts in view of that. The Chancellor, however, has said that he wants to cut taxes in time—and to him that means in time for the next election.
The Government boast about inflation. Again, most commentators question whether they will meet their inflation target. They are very proud of having lowered inflation, but again we should look at the international picture. The Government are very much in line with other countries and there are disinflationary forces in the international economy; in fact, our inflation rate is now higher than those of France, Germany, the United States and Japan. Last year, our inflation rate was 113 per cent. of the OECD average, only slightly less than the figure that obtained at the end of Labour's time in office: the figure was 122 per cent. in 1978. I do not think that the Government have too much to boast about, even in regard to inflation.
Those, of course, are the Government's chosen indicators. They ignore more worrying indicators, which have far gloomier implications for the country. The key indicator is investment, in which we come 22nd out of 24 OECD countries. The figure fell last year for the fifth successive year, and it is falling further this year. It is on that key factor that Labour's economic policy is concentrating; our analysis is based on the failure of investment, and all our prescriptions are directed primarily towards dealing with it. My hon. Friend the Member for Darlington (Mr. Milburn) spoke of capacity shortages, as has the Bank of England, and others have issued the same warning. That is the problem with which we are keenest to deal when we come to power.
There are many policies that I have no time to describe, but I should like to say a little about dividends, which we are examining in our corporate tax review. The enormous increase in dividends has, however, already been highlighted by a previous Financial Secretary to the Treasury, by the Select Committee on Trade and Industry and by the Institute of Fiscal Studies. They have increased from 1.5 per cent. of gross domestic product when the Government took office to 5.4 per cent. now. That almost mirrors the decline in investment from 21 per cent. in 1979 to 17 per cent. now. More of companies' profits must be used for investment rather than dividends.
The Government chose to ignore many other indicators—for instance, the growing inequality in society. There is no trade-off between equality and economic efficiency, as many Conservative Members often argue; in fact, there is much evidence that countries where there is more equality have better economic records than "unequal" countries such as ours. Our constituents perceive that as the reality of the present Government. The Chancellor merely referred to the growing wage inequality in his usual dismissive way in trying to put down our minimum-wage policy. On Monday, the


Secretary of State for Social Security said that we should conduct a pilot study for the minimum wage; but every country in Europe is "piloting" it, and many academic studies show that the Government are lying when they say that a minimum wage set at the correct rate will cause job losses.
Can the Government really justify circumstances in which a utility boss earns in one month what someone on £2.50 an hour will earn in four and a half years? What will they do about that? We know what they will do: they are introducing the jobseeker's allowance to drive low wages even lower. The problem is not just wage inequality; it is the whole regressive tax system in which the top 1 per cent. have been paid the equivalent of £300,000 in the Government's lifetime, while the bottom fifth pay tax at 39 per cent. rather than at the 31 per cent. rate that they paid in 1979.
The other great factor behind inequality—almost unmentioned by the Chancellor—is unemployment. The Government boast that the figures are falling, but we note that in the first three months of the year, employment fell too. Many people with jobs work part time. Some want to, but others do not: we are told that three quarters of a million people have part-time jobs that they do not want, which clearly increases the insecurity that many are experiencing. At some point in the past five years, 10 million people have been unemployed. That is why it is not just the poorest in society who feel a grievance against the Government.
Insecurity feeds through the whole of the middle areas of society and, of course, those sections of society are feeling the full brunt of the great tax increases—the greatest tax hike in British history. That is affecting those middle-income groups, just as it is affecting low-income groups. That is why there is today a great coalition of forces between middle-income, low-income and no-income people. That coalition took to us power 50 years ago this month, and it will take us to power as soon as the Government have the courage to call a general election. It cannot come too soon.

Mr. Nigel Forman: I add my personal warm words of welcome to my right hon. Friend the new Chief Secretary to the Treasury. I welcome him to his important duties in the Front-Bench team and extend those words to all my other right hon. and hon. Friends who are new to their Treasury responsibilities.
In dealing with their responsibilities, my right hon. and hon. Friends, like other members of Governments throughout the European Union and the advanced world, face two awkward realities when trying to steer the economy, a phrase that may be a misnomer these days in the world of global markets. As has been made clear in the debate tonight by many hon. Members, one reality is that we have not one homogeneous economy any more, but several. The second point is that no national authority, whether it is a central bank or a national Government, has any longer a monopoly of control or influence over economic conditions—if it ever had.
There are three main levers of economic policy— monetary, fiscal and supply side. Of those, the greatest room for manoeuvre available to national Government probably exists in the supply side. That should be a lesson for my right hon. Friends when taking policy forward.

In the past few years, Treasury Ministers have been steering the economy, as I rather quaintly put it, effectively. I shall give just a few figures. The corporate sector financial position has improved from deficits of about 4 per cent. of gross domestic product in 1989 and 1990 to a surplus of about 2 per cent. of GDP last year and, I think, a slightly larger surplus this year. In the personal sector, it is the same story of a healthy turnround from a deficit of 4 per cent. of disposable income in 1987–88 to a surplus of 4 per cent. in 1994.
In the public sector, I am glad to say that we are again moving in the right direction. The financial position is improving, but is still vulnerable to the triple risks of slower growth which, as everyone knows, affects tax revenues, the lack of buoyancy in revenues at all stages of the recent economic cycle, and the inevitable public spending pressures in the run-up to a general election, which I am sure thatn my right hon. Friend the Chief Secretary will be well able to cope with. He must, however, be robust in dealing with those pressures because otherwise dangers will flow and we intend to inherit the consequences of our decisions.
As my hon. Friend the Member for Hazel Grove (Sir T. Arnold) said in his interesting speech, the Bank of England, in testimony to the Select Committee on the Treasury and Civil Service, of which I am proud, with him, to be a member, referred to the "tale of two cities" in our economy, a phrase frequently used in this debate. It is right for our constituents to understand, even though it may be disagreeable for them, that whereas in recent years the internationally traded goods and services sector has been buoyant and highly successful, the rest of the economy has not.
No doubt exists that we must hope that the gap between those two sectors will converge, not only from the point of view of Conservative Members, because voters' subjective assessment of how the economy is going will improve if that convergence takes place. That is possible, first, because the figures on real personal disposable incomes are pointing in the right direction in relation to our constituents—this year, it is set to rise by a little over 1 per cent. and next year by more than 2 per cent.—and, secondly, because it would be economically and politically appropriate to have some judicious tax cuts in the forthcoming Budget.
It is not just a dual economy of two cities because there is a third city that one might almost call a shanty town outside the gates of the other two. It is the informal or black economy. So far it has not been mentioned in the debate, but it is important to take account of it in considering what is happening in our society. Nobody knows the precise size of that informal economy, but it is probably between 7 per cent. of GDP—that is the cautious Inland Revenue estimate—and 14 per cent. of GDP, which is an example of some of the academic estimates.
Let us take a middle figure of 10 per cent. of GDP as fair and possibly accurate. That represents £70 billion of economic activity in today's money, and it is largely outside all the formal mechanisms, the information gathering systems and, most of all, the tax system. Therefore, it becomes increasingly important for the Treasury to consider carefully the best and most intelligent ways in which any Chancellor can capture a proportion of that turnover for good public expenditure causes and other necessary Government expenses.
Against that background, any tax policy must not only be internationally competitive because of competition between fiscal jurisdictions—a point that I have made in previous debates—but also aim at the broadest possible tax base and the lowest possible rates, particularly on income, so as to maximise the revenue available. At the same time it must gradually shift more of the burden to taxes on expenditure and less to taxes on income and capital, as the Government have sought to do since 1979. Those broad principles should be borne in mind.
I should like to make two or three headline Budget recommendations. Because of the vagaries of the Budget timetable, this debate in July is one of the few opportunities for politicians to place such recommendations on the record. I should like to see several proposals in this year's Budget, but I do not expect the Minister to comment on them, simply to take note of them. First, we should cut the income tax burden on the large number of those who pay it, especially those on average and below average incomes. That is the priority.
Not long ago, I put down a parliamentary question which clearly shows that to make the 20p band of income tax the highest marginal rate for half of all taxpayers would cost about £4.3 billion in today's money, which is just over 0.5 per cent. of GDP. That is not an excessive sum, and it is well within the bounds of what could be prudently afforded by the Chancellor in November.
Secondly, on the expenditure side it is important especially to target any improvements that we can afford on the elderly, on those on the state pension who need help most. The way to do that would be to focus it on those born before a set date. I am trying to direct help to those who are over, say, the age of 75 and who, according to all the indicators, have some of the greatest social and personal needs.
Few of those who were born before 28 November 1920 have occupational pensions. Help would lift some of them out of income support, and that would be a countervailing saving on the other side of the account. By definition, that form of help would be a declining public expenditure commitment. I do not need to spell out why that is so, because it is fairly obvious. A deserving cause could be targeted and it would not take public expenditure out of control.
In the interests of brevity, I shall come to my third and final recommendation. The time has come to introduce a comprehensive tax incentive for personal savings. Many of my colleagues have been advocating such ideas from various quarters. Let us call it PIP—short for personal investment plan. It should be self-certified and there should be stiff penalties to deter potential abuse. It should be available to be offset against all forms of personal savings and investment up to a figure of let us say £10,000 per year per person. So it should be more generous than the existing structure of PEPs, but for the very good reason that it would cover all forms of savings instruments.
It would have great advantages for the investment problem, which has been one of the main themes of the debate. If we could achieve an increase in aggregate investment, it would be a great triumph for this country.

It could also be used by people to invest in their own future: in their education and training, their professional updating, refreshment of their skills, and so on.
That would all be to the good and would meet both a social and an economic need. I hope that my right hon. and learned Friend the Chancellor of the Exchequer and my right hon. Friend the Chief Secretary will bear those points in mind as they move towards this year's Budget.

Mr. Stephen Timms: I have only a few minutes and I want to make only one point, picking up from where the hon. Member for Carshalton and Wallington (Mr. Forman) left off. We face a crisis of inadequate investment in Britain, which the Government have failed to resolve. That has been the Government's central economic failure in the past 16 years.
We are a long way from seeing the investment-led recovery that will lead to sustainable growth in Britain. We face a crisis of investment and, therefore, a desperate lack of the underpinning that we need to transform our economy for the new century. In the years since 1979— some hon. Members have referred to this already—the average level of investment as a share of gross domestic product in this country has been 17 per cent. That has put us 22nd out of the 24 nations of the Organisation for Economic Co-operation and Development. We have the worst level of investment of the countries in the European Union and the G7. It is no surprise, therefore, that over the same period we have had the worst economic performance. Our economy has grown at an average of 1.6 per cent. since 1979—the worst of the G7 countries.
Recent evidence shows that our economy is still in a bad state. The Government told us in the Budget that investment would grow by 10.75 per cent. in 1995. Now we are told that it will be 4.75 per cent. In the first quarter of this year the level of investment fell. In March, the Confederation of British Industry told that its survey of investment intentions revealed that companies were increasingly cutting their investment plans in the face of inflationary pressures and the fears of higher interest rates.
The truth is that sustainable growth remains as elusive as ever. Inflationary problems are recurring, while in my constituency 21.7 per cent. of men in the labour market are out of work and there is no confidence anywhere that the position will get better. Nations such as ours that fail to invest have poor economic performance. Until we can tackle that problem and the investment gap, Britain will continue to slide out of the economic and social first division.
I wanted to say a little more about two areas of failure that say a great deal about the problems in our economy. I do not have the time to do that, but I shall just mention them in passing. The first is our lamentable record in research and development. A desperately small percentage of our GDP is spent on that, and the Government have done nothing to put it right. That augurs ill for the future.
The second area is very different, but says a great deal about the Government's failure to manage the economy in recent years. It is the saga of the channel tunnel rail link, in which I have a constituency interest. Eight years after work began on it, even this morning fundamental questions were being raised about whether the funding for it can ever be achieved. That saga poses searching questions about the Government's management of the


economy and the abject failure to deliver key investment projects that should be central to our economic development and which we need if we are to be a successful economy in the new millennium. There is no sign of those projects being put together successfully.
I want to quote a short point made in the recent Rowntree report, which described the problems of inequality in Britain. We should remember that a broad cross-section of people contributed to that report and worked on the team that put it together. It concluded:
Addressing growing inequality will require investment of resources which could otherwise go into current consumption.
The resources may come
from taxation, reductions elsewhere in public spending, greater spending by companies on training and investment, or by greater individual payments … But if we fail to make this investment, the costs we shall have to face and consumption we shall have to forgo in the future will be greater.
That is a stern warning and one that the Government must heed. If this Government do not, the next Labour Government most certainly will.

Mr. Andrew Smith: I welcome the Chief Secretary to the Treasury and his Front-Bench colleagues to their new positions. If I understand rightly from the place in which she is sitting, congratulations are also due to the hon. Member for Torridge and Devon, West (Miss Nicholson) on being appointed as a parliamentary private secretary. I hope that I have not just appointed her to that position. I see that I have not.
I am sure that the Chief Secretary is well aware that he takes over at a time when the downward revision of economic prospects that we have heard so much about in this debate, taken with the pre-election pressures for huge tax cuts and the Prime Minister's new £11 billion spending pledges, will make his job especially difficult.
We heard today a good example of what the right hon. Gentleman is up against. It is clear from the debate that there is a huge split between the Prime Minister and the Chancellor over the Prime Minister's commitment to abolish capital gains tax and inheritance tax—something which the Chancellor told us earlier was too ambitious. I challenge the Chief Secretary to tell us when he winds up whether it is Government policy to abolish capital gains tax and inheritance tax. There are big spending implications in that, which were added to by other aspirations expressed by Conservative Members—not least by the hon. Member for Carshalton and Wallington (Mr. Forman), who must have spent several billion pounds more in the few minutes he had to speak.
The new Chief Secretary will have to square the Chancellor's stated aspiration, to drive public spending below 40 per cent. of GDP, with his own previous speeches, which suggested that the Government would find it difficult to get it any lower. As Chancellor of the Duchy of Lancaster, he told the Institute of Directors:
The advocates of a return to pre-Modern minimalist Government are whistling in the wind. In any modern democracy, the government is always going to direct"—
"direct" was the word he used—
around 40 per cent. of the national wealth.
The debate has been interesting, if somewhat staccato with the number of contributions. I have a number of questions that arise from the debate to which I shall come

later and which I specifically want to address to the Chief Secretary. First, I want to underline the point made by my hon. Friends the Members for Birmingham, Hodge Hill (Mr. Davis) and for Ashfield (Mr. Hoon) and others, by saying how worrying it is that nearly all the key changes in the summer forecast compared with the autumn Red Book and Budget statement have been changes for the worse.
As my hon. Friend the Member for Monklands, East (Mrs. Liddell) said, no explanation is provided. We should be given one tonight. We know that forecasting is a precarious business—all those uncertainties multiplied together and all those small differences between large numbers. We must expect some variation. In so far as we have heard a Government explanation today, this is all there is to it: we should not worry about the summer forecast—things are pretty much all right, with only a few small differences here and there; the economy is basically on a sound footing.
For the sake of the country and for my party if we win the general election, I would like to think that the economy is on a sound footing. However, when one examines the story, judged against the evidence, one sees that it is far too complacent and self-serving. It presents a flawed analysis of what is going on in the country and reveals a poverty of ambition for what Britain can and must accomplish.
For the key indicators—investment, growth, inflation and the state of the public finances—to look so much worse than just last autumn should disturb the Conservatives every bit as much as it disturbs us. Indeed, one or two Conservative Back Benchers—the hon. Member for Milton Keynes, South-West (Mr. Legg), for example—came close to recognising that.
The Government cannot escape the fact that the arithmetically small differences to which they point are proportionally very large. The summer forecast shows growth in the current year now expected to be down by nearly a tenth as compared with the Budget forecast; inflation to be higher by nearly 20 per cent. proportionately; the PSBR to be higher by 10 per cent.; and business investment to increase by less than half as much as the Government were expecting just eight months ago.
They are not the statistics of a successful economic policy. They are, as my hon. Friends have pointed out, another episode in the Government's persistent failure to modernise the economy in such a way that we achieve genuinely sustainable non-inflationary growth. That is clear from the summer forecast figures. Whereas last autumn they were predicting growth higher than inflation, they are now pointing to fourth quarter inflation higher than the volume level of growth.
Despite welcome falls in the unemployment claimant count, the summer forecast concedes that the rise in employment has been very much less. It puts that down to the expansion of further and higher education and increases in early retirement and in the number of people claiming invalidity and sickness benefits. On page 25, the forecast states:
Unemployment therefore seems unlikely to go on falling faster than employment is rising.
That begs the crucial question whether the Government believe that the gap will be narrowed in future by unemployment falling more slowly or by employment rising more quickly.
The first specific question that I direct to the Chief Secretary is, given the assertion in the summer forecast, does he now expect unemployment to fall more slowly or employment to increase more rapidly? We need to know, because it makes an awful lot of difference to the unemployed and to the social and economic cost to our whole community of that unemployment.
My hon. Friend the Member for Coventry, South-East (Mr. Cunningham) spoke with passion about the unemployed in his constituency, as did other hon. Friends about unemployment in theirs. For this country still to have 836,000 people trapped in long-term unemployment and 619,000 young people without jobs is an obscenity that demands the urgent programme for jobs for which Labour has called, measures to stimulate the recruitment of the long-term unemployed and action to make it easier for people to move from welfare to work.
Equally worrying is Britain's position on investment, especially coming on top of the Government's poor historic record. Total investment in 1994 was still 10 per cent. below the level in 1989, before the recession, and investment as a proportion of GDP fell six years in a row, from 23 per cent. in 1989 to 17 per cent. last year. Given that record, to have to revise downwards, as the summer forecast does, predicted investment growth by more than a half—from 10.75 per cent. to 4.75 per cent., is an indictment not only of the Government's forecasting ability but of what they are doing to the real economy.
Of course, business investment has always proved to be one of the most difficult things to forecast. It is all very well to suppose that the fall in manufacturing investment that we witnessed in the first quarter of this year was, as the summer forecast put it, "erratic", but the forecast does not explain that deteriorating investment outlook. The country deserves an explanation. The second key question that I would like to direct to the Chief Secretary is this: will he tell the House why investment prospects are now so much worse than the Government claimed at the time of the Budget?
My hon. Friend the Member for Alyn and Deeside (Mr. Jones) made a passionate case for investment in manufacturing on behalf of the steel and aircraft industries in his constituency. It is clearer than ever before that Britain needs the strategy for investment that Labour has set out—

Mr. Budgen: Will the hon. Gentleman give way?

Mr. Smith: In a moment.
Britain needs greater incentives for long-term finance, more opportunities for small business to access capital and incentives for investment in skills, infrastructure and transferable technology. As my hon. Friend the Member for Newham, North-East (Mr. Timms) said, we need to get research and development moving in this country if we are to confront the global competitive challenges.

Mr. Budgen: The hon. Member for Alyn and Deeside (Mr. Jones) did not just talk about investment in manufacturing, but made a specific request for grants for the aerospace industry. Is the Labour party in favour of that?

Mr. Smith: We are in favour of an industrial policy that rebuilds the strength of industries undermined by the

Government's persistent mismanagement of this country's economy. We are in favour of getting industry moving through a partnership between Government and people and through training to raise the level of skills in our work force, to give people, like my hon. Friend's constituents, the opportunities which they have been denied under this Government and which they know that they can never expect from this Government.
The Government's record on investment is particularly serious given the evidence of high-capacity utilisation— at least in manufacturing industry—to the point where it is generally agreed that the output gap has significantly narrowed, which the summer forecast recognised. Indeed, some analysts believe that the gap may have disappeared altogether. That can only lend further weight to the point made by the Bank of England in its May inflation report, which was stressed by my hon. Friend the Member for Darlington (Mr. Milburn). It said:
capacity utilisation in manufacturing"—
in the first quarter of 1995—
was at its highest level for almost six years, at about 18 percentage points above its long-run average".
That underlined the warning in the February report:
Capacity constraints are becoming more widespread in industry … This will increase inflationary risks unless productive capacity increases".
That bears out Labour's argument, as several of my hon. Friends have pointed out, that the shortage of capacity—the failure to invest in plant, skills and infrastructure—limits Britain's growth and causes inflationary pressures to emerge even when there are more than 2 million people unemployed, consumer confidence and demand are very flat and, as some Conservative Members have pointed out, the construction industry has yet to struggle out of recession.
The hon. Member for Cambridgeshire, South-West (Sir A. Grant) referred to the difficulties facing the construction industry and drew attention to the benefits of implementation of the Latham report. He should ask his right hon. and hon. Friends in government when they will find the time to implement the legislative provisions of that report.
My right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon) was characteristically wise when he drew the attention of the House to the danger of failing to take account of acting on the depreciation and degeneration of our public capital. People will ask why, given the state of Britain's infrastructure, with its rundown housing and transport systems, the Government are now proposing to cut public investment even further.
My third specific question for the Chief Secretary, if he will listen for a moment, is this: why, according to the summer forecast, is public investment in 1996 set to fall by 8; per cent.—nearly twice the 4.5 per cent. cut that the Government put forward in the Red Book in the autumn?

Mr. Legg: If, as the hon. Gentleman believes, public investment should increase—that is the case that he and his hon. Friends are putting forward—how high is he prepared to see the public sector borrowing requirement go?

Mr. Smith: We want to cut the PSBR by getting people back to work. That is the way to cut borrowing in this country.
When we survey the state of the economy, we see that the Chancellor is in a difficult dilemma of his own making. Because of the underlying limits to productive capacity, he faces growth high enough to generate inflationary pressures above his target level but not high enough to lessen insecurity at work, to generate sufficient extra employment, or even to bring in tax revenues or to make people better off.
The right hon. and learned Gentleman's response to the dilemma is to go for greater short-term flexibility by loosening the targets that he has set himself on inflation and the public finances. In that way, he hopes to gain extra room for manoeuvre on both the monetary and the fiscal sides in the run-up to the general election.
The Chancellor now says that inflation will be between 1 and 4 per cent. most of the time, when previously— [Interruption.] I have here a letter signed by the Chancellor and addressed to the hon. Member for Hazel Grove (Sir T. Arnold), the Chairman of the Treasury and Civil Service Select Committee, which says:
But setting interest rates consistently at the level judged necessary to achieve the inflation target of 2½ per cent. or less should ensure that inflation remains in the range 1–4 per cent. most of the time.
It is no good the Chancellor saying that he did not say "most of the time", because he signed the letter.
Not only has the right hon. and learned Gentleman loosened his words there, but he now talks about bringing the public sector borrowing requirement back towards balance, whereas he used to say that it was his goal to achieve balance. In effect, he is admitting that his policy may be loosened in the pre-election period.
This is my fourth specific question to the Chief Secretary to the Treasury—

Mr. Stephen: Will the hon. Gentleman give way?

Mr. Smith: No.
If the Chancellor is not loosening his policy, why is he loosening his language? The public finances, another critical area in which the Government—

Mr. Kenneth Clarke: The hon. Gentleman's textual analysis is utterly ludicrous. The inflation target is 2.5 per cent. or lower. I said that we were moving towards balance in the medium term in the 1993 Red Book. It is absurd textual analysis to use a difference of one word between that and the 1994 Red Book. There has been a totally consistent policy. What is Labour's policy on public sector borrowing? What is Labour's policy on inflation targets? We have listened for another half an hour and still we have not heard a word of serious economic policy.

Mr. Smith: The Chancellor of the Exchequer is obviously in a serious difficulty that he cannot get out of. He could not tell my hon. Friend the Member for Dunfermline, East (Mr. Brown) earlier which of his various targets he was following in practice—whether it was the 2.5 per cent. that he told the Governor about, the 3 per cent. that he said in an interview would be a triumph, the 1 per cent. to 4 per cent. range that he tells the public about, or the "most of the time, but we might go over 4 per cent." to which he put his name when he signed that letter. The Government's policy is in chaos.
Not only is the PSBR now projected to be higher than the Government expected at the time of the Budget, but their own panel of independent forecasters has said that it will be 25 per cent. higher than they admit even now. That prompts my fifth question to the Chief Secretary. Does he regard the £16.1 billion in the summer forecast for 1996–97 as an acceptable level for the PSBR? Is it now a target for that year?

Sir Peter Hordern: rose—

Mr. Smith: No, I am running out of time.
When does the Chief Secretary expect the public finances to reach balance? Let us have a date. The Chancellor would not give us one earlier.
The right hon. Member for Horsham (Sir P. Hordern) invited us earlier to consider what had happened to business taxation. I have news for Conservative Members about that. Not only have the Government clobbered individuals by breaking all their promises on tax and banging on that extra £800 a year from which people are suffering even now, but they have taken more tax from companies as well.
Figures from the Library show that the average share of company income taken by the Conservative Government during their years in office, in corporation tax and other taxes, is 15 per cent., compared with 11 per cent. for the years of the previous Labour Government. In 1994, the Government took 13 per cent. of company income, compared with 11 per cent. in Labour's last year in office.
We were invited by the hon. Member for Brentford and Isleworth (Mr. Deva) to contrast the values and policies of the Conservative and Labour parties. I can tell the House that the choice before the country and the House is clear. The Conservative party breaks its promises on tax cutting and living standards, fails to invest for the future and leaves our productive capacity too small to generate the welfare that people need. The Government have divided the country, trapped millions in poverty and hit middle and lower-income Britain while they have failed to act to end excesses in the privatised utilities. The Government have surrendered their responsibilities to an unregulated market.
The Labour party stands for investment in people, industry and infrastructure, and wants to open up opportunities to enable everyone to make the most of their potential. We say that fairness is crucial to enable people to get on and to get the people of Britain pulling together for economic success. I remind Conservative Members of something that the country will not forget—that it was Labour who defeated the Government over the increase of VAT on fuel, while it was the Prime Minister, the Chancellor and the Conservative party who wanted to force through that unfair tax, just as they will extend VAT again if they have the chance.
The choice is between the parties, but which one can the public trust? The public can never trust the Conservatives again. Government Members have said, "No change is no chance." Labour will bring change and a new future for Britain, and I commend our amendment to the House.

The Chief Secretary to the Treasury (Mr. William Waldegrave): These economic debates are very different from debates on agriculture. They are much more fun, I


have to say. I hope that my right hon. and learned Friend the Chancellor will not find it offensive if I say that I found certain similarities between his speech and that of his shadow, the hon. Member for Dunfermline, East (Mr. Brown). They are both substantial figures who delivered speeches full of jokes. The only difference was that my right hon. and learned Friend had some substance between his jokes, while the hon. Gentleman just had jokes. They were good jokes, but there was no substance in his speech at all.
We did learn one or two things. The hon. Member for Gordon (Mr. Bruce) said that he would have liked interest rates to be higher, and that was helpful. I think that the hon. Member for Dunfermline, East really wanted interest rates to be higher, too. He shifted around a bit, but the tenor of what he was saying in his debate with my right hon. and learned Friend about the Governor of the Bank of England suggested that the hon. Gentleman would have put interest rates up.
There was also an announcement from the hon. Member for Dunfirmline, East of at least one new tax on business, for training. That is very admirable, and it is better that the hon. Gentleman should put that new tax forward firmly. It may be a good thing if he puts it forward and votes for it.
The problem for the Opposition today is a problem that I remember the late, great Keith Joseph explaining to me a long time ago when we were in opposition. He said that it was a miserable business being in opposition when the news is good—not that the news ever was good between 1974 and 1979—and added, "You have to emphasise as much as you can everything that is wrong."
The hon. Member for Oxford, East (Mr. Smith) played some wonderful games with percentages, and stated that a revision from 3.25 per cent. down to 3 per cent. was a great disaster. My goodness, Labour would have been pleased with figures such as those when they had inflation of nearly 27 per cent. It reminds me of Oxford city council, which is run by the partisans of the hon. Member for Bristol, South (Ms Primarolo). It wanted to put up a barrier to stop shoppers crossing a road because the number of road accidents had doubled. I asked how many casualties there had been and was told two—there had been one the year before. One can do things like that with percentages, and the hon. Member for Oxford, East was doing it, but it was not very effective.

Mr. Stephen: Will my right hon. Friend give way?

Mr. Waldegrave: I shall give way just once, as the hon. Member for Oxford, East did not keep to the agreement on time.

Mr. Stephen: I am much obliged to my right hon. Friend. When he reads Hansard tomorrow, he will see that the hon. Member for Oxford, East (Mr. Smith) took almost 22 minutes to wind up the debate, in the course of which he made one carping criticism after another of the Government, regaled us with figures of which we are all well aware and, apart from a few generalisations to which we can all say amen, gave no sign whatever of Labour's

policy. Is the government of this country to be entrusted to a party whose economic policies are so incredible that it will not even state publicly what they are?

Mr. Waldegrave: In coming to these debates, I have learnt that there is no hope from Opposition speeches or papers on their position. One always hopes that an Opposition will give ideas that one can pinch and claim as one's own, and then say what admirable new ideas one has had. There is no chance of that from the Labour party. Alternatively, one can look at their ideas and rebut them because they are wrong. There is no chance of that either, because no ideas are forthcoming. It is inconvenient of them and I do not think that they are earning their pay on this matter.
The hon. Members for Dunfermline, East and for Oxford, East raised one important matter. They tried to manufacture confusion about our inflation target. There is no confusion about our inflation target, as my hon. Friend the Member for Hazel Grove (Sir T. Arnold) said, and he understood it very well.
Surprisingly, the hon. Member for Gordon tried to contribute to that confusion. He of all people should know that there is no confusion, because he put a question to the Governor of the Bank of England when the Governor came to the Treasury and Civil Service Select Committee. He asked the Governor whether the Government had relaxed their inflation target and the Governor said, "No, I think that that is absolute rubbish." So it seems odd that the hon. Gentleman did not listen to the answer, and neither did the Opposition Front-Bench spokesmen.
Let me give an example of what my right hon. and learned Friend means. Let us say that the last Labour Government had inflation moving between 7 per cent. and 27 per cent. If their target had been consistent with that, they would have said, "We shall set a target at 17 per cent. or downwards" and that is exactly what they would have achieved—an average of 16 per cent. inflation in that period. So the arithmetic is really quite simple.
In an eloquent speech, my right hon. Friend the Member for Horsham (Sir P. Hordern) made the fundamental point that a long-term commitment to low inflation is what produces investment, rather than clever tricks or, Lord help us, state direction. A long-term commitment to low inflation changes the culture of investment and produces long-term investments. Sustained, healthy economic growth at a strong rate, which is what we have now—stronger than any other European country—will become a permanent feature of the landscape only if we keep inflation down and achieve those long-term investments.
Many hon. Members on both sides of the House welcome the fact that the recovery has been led by exports. That is surely to be welcomed. Every Government since the second world war have sought to achieve that, but this is genuinely the first time that a recovery has been export led. Exports have risen by more than 9 per cent. compared with a year ago. My hon. Friends the Members for Cambridgeshire, South-West (Sir A. Grant) and for Bosworth (Mr. Tredinnick) made that point eloquently.
Although manufacturing investment has risen in the past year, obviously we want it to increase further. The framework for that seems to be in place because investment is ultimately caused by profitability. The Opposition, even new Labour, are pretty uncomfortable


with profits in private sector companies. They do not really like them. They nearly always describe profits as excessive and conduct a sort of vendetta against companies that make large profits. The fact that profitability has now returned to its highest since 1988 and is higher than at any time in the 1970s is a good indicator that we shall get that investment in the future.
The hon. Member for Monklands, East (Mrs. Liddell) made an uncharacteristically unfair point about inward investment. She complained that we were not obtaining enough inward investment.
I do not know what figures the hon. Lady can have been reading. We have about a third of all inward investment into the European Union and 40 per cent. of the United States and Japanese investment into the European Union, and a recent Confederation of British Industry survey showed us as being the second favourite destination of mobile investment in the world, after the United States.
Therefore, it was a little unfair of the hon. Lady to make that criticism, and she well knows that Scotland has rightly been a great beneficiary of that inward investment, with a good work force and plenty of good opportunities for investment. That leads to the creation of jobs, not only in Scotland but throughout the United Kingdom.
As many Opposition Members and all Conservative Members who spoke have said, we are talking about the creation of long-term stable jobs in the only way possible—660,000 new jobs in the past two and a half years and, on either measure, unemployment has decreased during that time. Let us hope that that continues.
Living standards are now increasing after inflation and tax. Real personal disposal income is expected to increase by about 1.5 per cent. this year, and that should mean an extra £5 a week for households on average. We expect to keep that going next year and beyond.
Unjustifiably, several Opposition Members accused my right hon. and learned Friend the Chancellor of complacency. One person, the hon. Member for Oxford, East, accused him of loose language. My right hon. and learned Friend could never be accused of any manner of loose language, and he certainly could not be accused of complacency.
If we are to be accused of complacency, let us stand, not on our forecast, which we believe, but on the forecasts of outside organisations. The hon. Member for Oxford, East, who is learned in those matters, will have studied those forecasts and he will know that our forecast lies about in the middle of the range of forecasts by outside organisations. Therefore, by saying that that pattern is likely to come about in the next year and the next year or two we are not being complacent; we are simply predicting what is the best advice that can be given to us from inside and from outside.
The Organisation for Economic Co-operation and Development, for example, expects the United Kingdom economy to grow faster than any other major European country again this year. That is not complacency; it is a fact of which we should be proud, and which we should take the necessary steps to maintain in future.
Many of my hon. Friends mentioned the subject that dominates my mind, and will dominate my mind while I hold this job, which I am delighted to hold—public spending.
As I take on what is a crucial job in Government, described to me by Leon Brittan as the most fascinating job in Government, it is legitimate for my hon. Friends to ask me, in the phraseology of my hon. Friend the Member for Wolverhampton, South-West (Mr. Budgen), what my prejudice or instinct is.
I have sometimes been described as a one-nation Tory or, if one wants to be offensive, a wet Tory—the type of person who admires Rab Butler and people of that kind. I do admire Rab Butler; I plead guilty to admiring Rab Butler.
Let me remind the House what Rab Butler did when he was one of the most distinguished holders of my right hon. and learned Friend's office—he was also Deputy Prime Minister—and in that great office he reduced Government spending from 37.75 per cent. of gross domestic product to 33.5 per cent. of GDP between 1952 and 1955. If that is being a Tory wet, I could probably bring my right hon. Friend the Member for Wokingham (Mr. Redwood) and my hon. Friend the Member for Bridlington (Mr. Townend) with me. My hon. Friend would put up with wetness of that type, I believe, if we reduced public spending to 33.5 per cent. of GDP.
I do not believe that I shall be able to do that, but I believe that I shall have to work, and shall work, extremely hard to continue the Government's commitment to bringing down the proportion of public spending in GDP. That will be the principal target of my efforts and of the efforts of the Treasury in the next spending round.
I believe that that is something that unites all Conservative Members. It is one of the things that fundamentally divide us from the Labour party. The Labour party will not give us targets and so on. It is uncomfortable with that because, as we decrease the percentage of GDP that is spent by the public sector, it will find it more and more difficult not to give an answer. Labour Members will make the debating points that the hon. Member for Dunfermline, East has made—"You just put it up." Yes, it did go up in the recession, but we shall bring it down to the point where the hon. Gentleman must, in the end, be smoked out into agreeing with us, or he will be shown to believe in nothing.
The two most eloquent speeches today were made by the right hon. Member for Chesterfield (Mr. Benn) and by my hon. Friend the Member for Wolverhampton, South-West. The right hon. Member for Chesterfield raised the tone of the debate by offering a real and philosophically coherent alternative. The conventions of the House do not permit me to refer to an amendment that was not chosen, but the right hon. Member's speech reminds us that, although Labour Members tease us about the divisions in our party, the divisions in the Labour party are much deeper, because they are based on a complete difference in philosophy.
The amendment appearing in the name of the right hon. Member for Chesterfield contains a reference to the philosophy of Her Majesty's Government—a belief in markets and so on. I think that that is what used to be called code; he was really referring to Her Majesty's loyal Opposition. It must hurt the right hon. Gentleman that the Labour Front Bench now professes a commitment to market economics which must be anathema to him and to his colleagues who signed the amendment.
Are they trying to tell us something? Are we to assume that Labour Members have become pink Conservatives after all? My right hon. Friend—I beg his pardon: he should be right hon.—the Member for Wolverhampton, South-West said that we should not allow the country to be fooled by that. [Interruption.] My colleagues on the Front Bench are saying, "Steady on." My hon. Friend made his point very eloquently.
What are the gut feelings of Labour Members about those matters? I do not believe that they have become pink Conservatives; I believe that they have listened to the PR men and the pollsters, and they do not think that they will be elected if they allow their true colours to show. I believe fundamentally—it is obvious from every debate in this place and in our constituencies and from the hon. Member for Bristol, South (Ms Corston), who is a redoubtable fighter for socialism but who is very quiet nowadays—that Labour Members believe in higher spending and higher taxing. If they do not believe in that, they do not believe in anything.

Mr. Andrew Smith: Will the Chief Secretary tell the House whether it is Government policy to abolish capital gains tax and inheritance tax?

Mr. Waldegrave: That is a nice easy question to answer: yes. When we can afford to do it, we shall do it.
My hon. Friend the Member for Wolverhampton, South-West should be interested in my next point. Labour Members' commitment to a belief in market economics does not go as far as believing in rewarding the winners in a market system. We believe that the abolition of those taxes will make capital markets work better so that everyone will be better off. Labour Members cannot stomach that, so they fall off the train. At that stage, they do the populist bit and say, "It's going to make some people richer, so we're against it."
That is also their reaction to privatisation. We did not hear anything about the fact that the privatised industries now contribute £55 million a week to the Exchequer, when they cost £50 million a week when they were left to us by Labour. We hear only persistent attacks on a few individuals whom Labour Members allege are overpaid. They go for the cheap populist vote in order to disguise the fact that they have no belief in privatisation.
My hon. Friend's point was eloquently reinforced by a number of Labour Members, a few of whom referred to more spending. They have been house trained to the point where they do not state any figures; they have been told to disguise the fact that their spending pledges are real. That is what so offends the honest socialists on the Opposition Benches who want to spend money and who believe in spending money. That is what so offended the right hon. Member for Birmingham, Sparkbrook (Mr. Hattersley). He recently wrote in The Guardian newspaper that Labour now has a clear choice: it can be either the party of high taxation and proud of it, or the party of higher taxes which it is ashamed to describe.
The Labour party has now become the party that is ashamed to mention its own name—the party that dare not speak its name. It is really the party of high spending and high taxation, but it will not be brave enough to say so.

Question put, That the amendment be made:—

The House divided: Ayes 233, Noes 300.

Division No. 203]
[10.00 pm


AYES


Abbott, Ms Diane
Field, Frank (Birkenhead)


Adams, Mrs Irene
Fisher, Mark


Ainsworth, Robert (Cov'try NE)
Flynn, Paul


Allen, Graham
Foster, Rt Hon Derek


Anderson, Donald (Swansea E)
Fraser, John


Armstrong, Hilary
Fyfe, Maria


Austin-Walker, John
Gapes, Mike


Banks, Tony (Newham NW)
Garrett, John


Barnes, Harry
George, Bruce


Barron, Kevin
Gerrard, Neil


Battle, John
Gilbert, Rt Hon Dr John


Bayley, Hugh
Godman, Dr Norman A


Beckett, Rt Hon Margaret
Godsiff, Roger


Bell, Stuart
Golding, Mrs Llin


Benn, Rt Hon Tony
Gordon, Mildred


Bennett, Andrew F
Graham, Thomas


Bermingham, Gerald
Grant, Bernie (Tottenham)


Berry, Roger
Griffiths, Nigel (Edinburgh S)


Betts, Clive
Griffiths, Win (Bridgend)


Blunkett, David
Grocott, Bruce


Boateng, Paul
Gunnel, John


Bray, Dr Jeremy
Hain, Peter


Brown, Gordon (Dunfermline E)
Hall, Mike


Brown, N (N'c'tle upon Tyne E)
Hanson, David


Burden, Richard
Hardy, Peter


Byers, Stephen
Hattersley, Rt Hon Roy


Caborn, Richard
Henderson, Doug


Callaghan, Jim
Heppell, John


Campbell, Mrs Anne (C'bridge)
Hill, Keith (Streatham)


Campbell, Ronnie (Blyth V)
Hinchliffe, David


Campbell-Savours, D N
Hodge, Margaret


Cann, Jamie
Hoey, Kate


Chisholm, Malcolm
Hogg, Norman (Cumbernauld)


Church, Judith
Home Robertson, John


Clapham, Michael
Hood, Jimmy


Clark, Dr David (South Shields)
Hoon, Geoffrey


Clarke, Eric (Midlothian)
Howells, Dr. Kim (Pontypridd)


Clarke, Tom (Monklands W)
Hoyle, Doug


Clwyd, Mrs Ann
Hughes, Kevin (Doncaster N)


Coffey, Ann
Hughes, Robert (Aberdeen N)


Cohen, Harry
Hughes, Roy (Newport E)


Connarty, Michael
Hutton, John


Cook, Frank (Stockton N)
Illsley, Eric


Corbett, Robin
Jackson, Glenda (H'stead)


Corbyn, Jeremy
Jackson, Helen (Shef'ld, H)


Corston, Jean
Jamieson, David


Cousins, Jim
Janner, Greville


Cox, Tom
Jones, Barry (Alyn and D'side)


Cummings, John
Jones, Jon Owen (Cardiff C)


Cunliffe, Lawrence
Jones, Lynne (B'ham S O)


Cunningham, Jim (Covy SE)
Jowell, Tessa


Cunningham, Roseanna
Keen, Alan


Dafis, Cynog
Khabra, Piara S


Dalyell, Tam
Kilfoyle, Peter


Darling, Alistair
Lestor, Joan (Eccles)


Davidson, Ian
Lewis, Terry


Davies, Bryan (Oldham C'tral)
Liddell, Mrs Helen


Davies, Rt Hon Denzil (Llanelli)
Litherland, Robert


Davis, Terry (B'ham, H'dge H'l)
Livingstone, Ken


Denham, John
Lloyd, Tony (Stretford)


Dewar, Donald
Llwyd, Elfyn


Dixon, Don
Loyden, Eddie


Dobson, Frank
McAllion, John


Donohoe, Brian H
McAvoy, Thomas


Dunwoody, Mrs Gwyneth
Macdonald, Calum


Eagle, Ms Angela
McFall, John


Eastham, Ken
Mackinlay, Andrew


Etherington, Bill
McLeish, Henry


Evans, John (St Helens N)
McMaster, Gordon


Fatchett, Derek
McWilliam, John


Faulds, Andrew
Madden, Max






Mahon, Alice
Roche, Mrs Barbara


Marek, Dr John
Rogers, Allan


Marshall, Jim (Leicester, S)
Rooker, Jeff


Martin, Michael J (Springburn)
Rooney, Terry


Martlew, Eric
Ross, Ernie (Dundee W)


Maxton, John
Rowlands, Ted


Meacher, Michael
Salmond, Alex


Meale, Alan
Sedgemore, Brian


Michael, Alun
Sheerman, Barry


Michie, Bill (Sheffield Heeley)
Sheldon, Rt Hon Robert


Milburn, Alan
Shore, Rt Hon Peter


Miller, Andrew
Short, Clare


Mitchell, Austin (Gt Grimsby)
Simpson, Alan


Morgan, Rhodri
Skinner, Dennis


Morley, Ellitot
Smith, Andrew (Oxford E)


Morris, Rt Hon Alfred (Wy'nshawe)
Smith, Chris (Isl'ton S & F'sbury)


Morris, Estelle (B'ham Yardley)
Smith, Llew (Blaenau Gwent)


Morris, Rt Hon John (Aberavon)
Snape, Peter


Mowlam, Marjorie
Spearing, Nigel


Mudie, George
Spellar, John


Mullin, Chris
Stevenson, George


Murphy, Paul
Strang, Dr. Gavin


Oakes Rt Hon Geogery
Straw, Jack



Sutcliffe, Gerry


O'Brien, Mike (N W'kshire)
Taylor, Mrs Ann (Dewsbury)


O'Brien, William (Normanton)
Thompson, Jack (Wansbeck)


O'Hara, Edward
Timms, Stephen


Olner, Bill
Touhig, Don


O'Neill, Martin
Vaz, Keith


Orme, Rt Hon Stanley
Walker, Rt Hon Sir Harold


Parry, Robert
Walley, Joan


Pearson, Ian
Wardell, Gareth (Gower)


Pendry, Tom
Wareing, Robert N


Pickthall, Colin
Watson, Mike


Pike, Peter L
Wicks, Malcolm


Pope, Greg
Williams, Rt Hon Alan (Sw'n W)


Powell, Ray (Ogmore)
Williams, Alan W (Carmarthen)


Prentice, Gordon (Pendle)
Wilson, Brian


Prescott, Rt Hon John
Winnick, David


Primarolo, Dawn
Wise, Audrey


Purchase, Ken
Worthington, Tony


Quin, Ms Joyce
Wray, Jimmy


Radice, Giles
Wright, Dr Tony


Randall, Stuart
Young, David (Bolton SE)


Raynsford, Nick



Reid, Dr John
Tellers for the Ayes:


Robertson, George (Hamilton)
Mr. Joe Benton and Mr. Jim Dowd.


Robinson, Geoffrey (Co'try NW)





NOES


Ainsworth, Peter (East Surrey)
Bottomley, Rt Hon Virginia


Alexander, Richard
Bowden, Sir Andrew


Alison, Rt Hon Michael (Selby)
Bowis, John


Amess, David
Boyson, Rt Hon Sir Rhodes


Ancram, Michael
Brandreth, Gyles


Arbuthnot, James
Brazier, Julian


Arnold, Jacques (Gravesham)
Bright, Sir Graham


Arnold, Sir Thomas (Hazel Grv)
Brooke, Rt Hon Peter


Ashby, David
Brown, M (Brigg & Cl'thorpes)


Atkins, Rt Hon Robert
Browning, Mrs Angela


Atkinson, David (Bour'mouth E)
Bruce, Ian (Dorset)


Baker, Rt Hon Kenneth (Mole V)
Budgen, Nicholas


Baker, Nicholas (North Dorset)
Burns, Simon


Baldry, Tony
Burt, Alistair


Banks, Matthew (Southport)
Butcher, John


Banks, Robert (Harrogate)
Butler, Peter


Bates, Michael
Butterfill, John


Batiste, Spencer
Carlisle, John (Luton North)


Bellingham, Henry
Carlisle, Sir Kenneth (Lincoln)


Bendall, Vivian
Carrington, Matthew


Beresford, Sir Paul
Carttiss, Michael


Biffen, Rt Hon John
Channon, Rt Hon Paul


Bonsor, Sir Nicholas
Chapman, Sydney


Booth, Hartley
Churchill, Mr


Boswell, Tim
Clappison, James


Bottomley, Peter (Eltham)
Clark, Dr Michael (Rochford)





Clarke, Rt Hon Kenneth (Ru'clif)
Hendry, Charles


Clifton-Brown, Geoffrey
Heseltine, Rt Hon Michael


Coe, Sebastian
Hicks, Robert


Colvin, Michael
Hill, James (Southampton Test)


Congdon, David
Hogg, Rt Hon Douglas (G'tham)


Conway, Derek
Horam, John


Coombs, Anthony (Wyre For'st)
Hordern, Rt Hon Sir Peter


Coombs, Simon (Swindon)
Howard, Rt Hon Michael


Cope, Rt Hon Sir John
Howarth, Alan (Strat'rd-on-A)


Cormack, Sir Patrick
Howell, Rt Hon David (G'dford)


Couchman, James
Howell, Sir Ralph (N Norfolk)


Cran, James
Hughes, Robert G (Harrow W)


Currie, Mrs Edwina (S D'by'ire)
Hunt, Rt Hon David (Wirral W)


Curry, David (Skipton & Ripon)
Hunt, Sir John (Ravensbourne)


Davies, Quentin (Stamford)
Hunter, Andrew


Davis, David (Boothferry)
Hurd, Rt Hon Douglas


Day, Stephen
Jack, Michael


Deva, Nirj Joseph
Jackson, Robert (Wantage)


Devlin, Tim
Jenkin, Bernard


Dorrell, Rt Hon Stephen
Johnson Smith, Sir Geoffrey


Douglas-Hamilton, Lord James
Jones, Gwilym (Cardiff N)


Dover, Den
Jones, Robert B (W Hertfdshr)


Duncan, Alan
Jopling, Rt Hon Michael


Dunn, Bob
Kellett-Bowman, Dame Elaine


Durant, Sir Anthony
Key, Robert


Dykes, Hugh
King, Rt Hon Tom


Eggar, Rt Hon Tim
Kirkhope, Timothy


Elletson, Harold
Knapman, Roger


Emery, Rt Hon Sir Peter
Knight, Mrs Angela (Erewash)


Evans, David (Welwyn Hatfield)
Knight Greg (Derby N)


Evans, Jonathan (Brecon)
Knight, Dame Jill (Bir'm E'st'n)


Evans, Roger (Monmouth)
Knox, Sir David


Evennett, David
Kynoch, George (Kincardine)


Faber, David
Lait, Mrs Jacqui


Fabricant, Michael
Lamont, Rt Hon Norman


Fenner, Dame Peggy
Lang, Rt Hon Ian


Reld, Barry (Isle of Wight)
Lawrence, Sir Ivan


Fishburn, Dudley
Legg, Barry


Forman, Nigel
Leigh, Edward


Forsyth, Rt Hon Michael (Stirling)
Lennox-Boyd, Sir Mark


Forth, Eric
Lester, Jim (Broxtowe)


Fox, Dr Liam (Woodspring)
Lidington, David


Fox, Sir Marcus (Shipley)
Lightbown, David


Freeman, Rt Hon Roger
Lilley, Rt Hon Peter


French, Douglas
Lloyd, Rt Hon Sir Peter (Fareham)


Fry, Sir Peter
Lord, Michael


Gale, Roger
Luff, Peter


Gallie, Phil
MacKay, Andrew


Gardiner, Sir George
Maclean, Rt Hon David


Garel-Jones, Rt Hon Tristan
McLoughlin, Patrick


Garnier, Edward
McNair-Wilson, Sir Patrick


Gill, Christopher
Madel, Sir David


Gillan, Cheryl
Maitland, Lady Olga


Goodlad, Rt Hon Alastair
Major, Rt Hon John


Goodson-Wickes, Dr Charles
Malone, Gerald


Gorman, Mrs Teresa
Mans, Keith


Gorst, Sir John
Marland, Paul


Grant, Sir A (SW Cambs)
Marlow, Tony


Greenway, Harry (Ealing N)
Marshall, John (Hendon S)


Greenway, John (Ryedale)
Marshall, Sir Michael (Arundel)


Griffiths, Peter (Portsmouth, N)
Martin, David (Portsmouth S)


Grylls, Sir Michael
Mawhinney, Rt Hon Dr Brian


Hague, William
Mellor, Rt Hon David


Hamilton, Rt Hon Sir Archibald
Merchant, Piers


Hamilton, Neil (Tatton)
Mills, Iain


Hampson, Dr Keith
Mitchell, Andrew (Gedling)


Hanley, Rt Hon Jeremy
Mitchell, Sir David (NW Hants)


Hannam, Sir John
Moate, Sir Roger


Hargreaves, Andrew
Monro, Sir Hector


Harris, David
Montgomery, Sir Fergus


Haselhurst, Sir Alan
Moss, Malcolm


Hawkins, Nick
Needham, Rt Hon Richard


Hawksley, Warren
Nelson, Anthony


Hayes, Jerry
Neubert, Sir Michael


Heald, Oliver
Newton, Rt Hon Tony


Heathcoat-Amory, David
Nicholls, Patrick






Nicholson, David (Taunton)
Stanley, Rt Hon Sir John


Nicholson, Emma (Devon West)
Steen, Anthony


Norris, Steve
Stephen, Michael


Onslow, Rt Hon Sir Cranley
Stern, Michael


Oppenheim, Phillip
Stewart, Allan


Ottaway, Richard
Streeter, Gary


Page, Richard
Sumberg, David


Paice, James
Sweeney, Walter


Patnick, Sir Irvine
Sykes, John


Patten, Rt Hon John
Tapsell, Sir Peter


Pattie, Rt Hon Sir Geoffrey
Taylor, Ian (Ester)


Pawsey, James
Taylor, Sir Teddy (Southend, E)


Peacock, Mrs Elizabeth
Temple-Morris, Peter


Pickles, Eric
Thomason, Roy


Porter, Barry (Wirral S)
Thompson, Sir Donald (C'er V)


Porter, David (Waveney)
Thompson, Patrick (Norwich N)


Portilto, Rt Hon Michael
Thornton, Sir Malcolm


Powell, William (Corby)
Thumham, Peter


Rathbone, Tim
Townend, John (Bridlington)


Redwood, Rt Hon John
Townsend, Cyril D (Bexl'yh'th)


Renton, Rt Hon Tim
Tracey, Richard


Richards, Rod
Tredinnick, David


Riddick, Graham
Trend, Michael


Rifkind, Rt Hon Malcolm
Trotter, Neville


Robathan, Andrew
Twinn, Dr Ian


Roberts, Rt Hon Sir Wyn
Vaughan, Sir Gerard


Robertson, Raymond (Ab'd'n S)
Viggers, Peter


Robinson, Mark (Somerton)
Waldegrave, Rt Hon William


Rowe, Andrew (Mid Kent)
Walden, George


Rumbdd, Rt Hon Dame Angela
Walker, Bin (N Tayside)


Sackville, Tom
Waller, Gary


Sainsbury, Rt Hon Sir Timothy
Ward, John


Scott, Rt Hon Sir Nicholas
Wardle, Charles (Bexhill)


Shaw, David (Dover)
Waterson, Nigel


Shaw, Sir Giles (Pudsey)
Watts, John


Shephard, Rt Hon Gillian
Wells, Bowen


Shepherd, Colin (Hereford)
Whitney, Ray


Shepherd, Richard (Aldridge)
Whittingdale, John


Shersby, Sir Michael
Widdecombe, Ann


Sims, Roger
Wiggin, Sir Jerry


Smith, Tim (Beaconsfield)
Wilkinson, John


Soames, Nicholas
Wilshire, David


Speed, Sir Keith
Winterton, Mrs Ann (Congleton)


Spencer, Sir Derek
Wolfson, Mark


Spicer, Sir James (W Dorset)
Yeo, Tim


Spicer, Michael (S Worcs)
Young, Rt Hon Sir George


Spink, Dr Robert



Spring, Richard
Tellers for the Noes:


Sproat, Iain
Mr. Timothy Wood and Mr. David Willetts.


Squire, Robin (Hornchurch)

Question accordingly negatived.

Main Question put: —

The House divided: Ayes 300, Noes 251.

Division No. 204]
[10.15 pm


AYES


Ainsworth, Peter (East Surrey)
Batiste, Spencer


Alexander, Richard
Bellingham, Henry


Alison, Rt Hon Michael (Selby)
Bendall, Vivian


Amess, David
Beresford, Sir Paul


Ancram, Michael
Biffen, Rt Hon John


Arbuthnot, James
Bonsor, Sir Nicholas


Arnold, Jacques (Gravesham)
Booth, Hartley


Arnold, Sir Thomas (Hazel Grv)
Boswell, Tim


Ashby, David
Bottomley, Peter (Eltham)


Atkins, Rt Hon Robert
Bottomley, Rt Hon Virginia


Atkinson, David (Bour'mouth E)
Bowden, Sir Andrew


Baker, Rt Hon Kenneth (Mole V)
Bowis, John


Baker, Nicholas (North Dorset)
Boyson, Rt Hon Sir Rhodes


Baldry, Tony
Brandreth, Gyles


Banks, Matthew (Southport)
Brazier, Julian


Banks, Robert (Harrogate)
Bright, Sir Graham


Bates, Michael
Brooke, Rt Hon Peter





Brown, M (Brigg & Cl'thorpes)
Greenway, Harry (Ealing N)


Browning, Mrs Angela
Greenway, John (Ryedale)


Bruce, Ian (Dorset)
Griffiths, Peter (Portsmouth, N)


Budgen, Nicholas
Grylls, Sir Michael


Burns, Simon
Hague, William


Burt, Alistair
Hamilton, Rt Hon Sir Archibald


Butcher, John
Hamilton, Neil (Tatton)


Butler, Peter
Hampson, Dr Keith


Butterfill, John
Hanley, Rt Hon Jeremy


Carlisle, John (Luton North)
Hannam, Sir John


Carlisle, Sir Kenneth (Lincoln)
Hargreaves, Andrew


Carrington, Matthew
Harris, David


Channon, Rt Hon Paul
Haselhurst, Sir Alan


Chapman, Sydney
Hawkins, Nick


Churchill, Mr
Hawksley, Warren


Clappison, James
Hayes, Jerry


Clark, Dr Michael (Rochford)
Heald, Giver


Clarke, Rt Hon Kenneth (Ru'clif)
Heathcoat-Amory, David


Clifton-Brown, Geoffrey
Hendry, Charles


Coe, Sebastian
Heseltine, Rt Hon Michael


Colvin, Michael
Hicks, Robert


Congdon, David
Hill, James (Southampton Test)


Conway, Derek
Hogg, Rt Hon Douglas (G'tham)


Coombs, Anthony (Wyre For'st)
Horam, John


Coombs, Simon (Swindon)
Hordem, Rt Hon Sir Peter


Cope, Rt Hon Sir John
Howard, Rt Hon Michael


Cormack, Sir Patrick
Howarth, Alan (Strat'rd-on-A)


Couchman, James
Howell, Rt Hon David (G'dford)


Cran, James
Howell, Sir Ralph (N Norfolk)


Currie, Mrs Edwina (S D'by'ire)
Hughes, Robert G (Harrow W)


Curry, David (Skipton & Ripon)
Hunt, Rt Hon David (Wirral W)


Davies, Quentin (Stamford)
Hunt, Sir John (Ravensbourne)


Davis, David (Boothferry)
Hunter, Andrew


Day, Stephen
Hurd, Rt Hon Douglas


Deva, Nirj Joseph
Jack, Michael


Devlin, Tim
Jackson, Robert (Wantage)


Dorrell, Rt Hon Stephen
Jenkin, Bernard


Douglas-Hamilton, Lord James
Johnson Smith, Sir Geoffrey


Dover, Den
Jones, Gwilym (Cardiff N)


Duncan, Alan
Jones, Robert B (W Hertfdshr)


Duncan-Smilh, Iain
Jopling, Rt Hon Michael


Dunn, Bob
Kellett-Bowman, Dame Elaine


Durant, Sir Anthony
Key, Robert


Dykes, Hugh
King, Rt Hon Tom


Eggar, Rt Hon Tim
Kirkhope, Timothy


Elletson, Harold
Knapman, Roger


Emery, Rt Hon Sir Peter
Knight, Mrs Angela (Erewash)


Evans, David (Welwyn Hatfield)
Knight, Greg (Derby N)


Evans, Jonathan (Brecon)
Knight, Dame Jill (Bir'm E'st'n)


Evans, Roger (Monmouth)
Knox, Sir David


Evennett, David
Kynoch, George (Kincardine)


Faber, David
Lait, Mrs Jacqui


Fabricant, Michael
Lamont, Fit Hon Norman


Fenner, Dame Peggy
Lang, Rt Hon Ian


Field, Barry (Isle of Wight)
Lawrence, Sir Ivan


Fishburn, Dudley
Legg, Barry


Forman, Nigel
Leigh, Edward


Forsyth, Rt Hon Michael (Stirling)
Lennox-Boyd, Sir Mark


Forth, Eric
Lester, Jim (Broxtowe)


Fox, Dr Liam (Woodspring)
Lidington, David


Fox, Sir Marcus (Shipley)
Lightbown, David


Freeman, Rt Hon Roger
Lilley, Rt Hon Peter


French, Douglas
Lloyd, Rt Hon Sir Peter (Fareham)


Fry, Sir Peter
Lord, Michael


Gale, Roger
Luff, Peter


Gallie, Phil
MacKay, Andrew


Gardiner, Sir George
Maclean, Rt Hon David


Garel-Jones, Rt Hon Tristan
McLoughlin, Patrick


Garnier, Edward
McNair-Wilson, Sir Patrick


Gill, Christopher
Madel, Sir David


Gillan, Cheryl
Maitland, Lady Olga


Goodlad, Rt Hon Alastair
Major, Rt Hon John


Goodson-Wickes, Dr Charles
Malone, Gerald


Gorrnan, Mrs Teresa
Mans, Keith


Gorst, Sir John
Marland, Paul


Grant, Sir A (SW Cambs)
Marlow, Tony






Marshall, John (Hendon S)
Soames, Nicholas


Marshall, Sir Michael (Arundel)
Speed, Sir Keith


Martin, David (Portsmouth S)
Spencer, Sir Derek


Mawhinney, Rt Hon Dr Brian
Spicer, Sir James (W Dorset)


Mellor, Rt Hon David
Spicer, Michael (S Worcs)


Merchant Piers
Spink, Dr Robert


Mills, Iain
Spring, Richard


Mitchell, Andrew (Gedling)
Sproat, Iain


Mitchell, Sir David (NW Hants)
Squire, Robin (Hornchurch)


Moate, Sir Roger
Stanley, Rt Hon Sir John


Monro, Sir Hector
Steen, Anthony


Montgomery, Sir Fergus
Stephen, Michael


Moss, Malcolm
Stern, Michael


Needham, Rt Hon Richard
Stewart, Allan


Nelson, Anthony
Streeter, Gary


Neubert, Sir Michael
Sumberg, David


Newton, Rt Hon Tony
Sweeney, Walter


Nicholls, Patrick
Sykes, John


Nicholson, David (Taunton)
Tapsell, Sir Peter


Nicholson, Emma (Devon West)
Taylor, Ian (Esher)


Norris, Steve
Taylor, Sir Teddy (Southend, E)


Onslow, Rt Hon Sir Cranley
Temple-Morris, Peter


Oppenheim, Phillip
Thomason, Roy


Ottaway, Richard
Thompson, Sir Donald (C'er V)


Page, Richard
Thompson, Patrick (Norwich N)


Paice, James
Thornton, Sir Malcolm


Patnick, Sir Irvine
Thurnham, Peter


Patten, Rt Hon John
Townend, John (Bridlington)


Pattie, Rt Hon Sir Geoffrey
Townsend, Cyril D (Bexl'yh'th)


Pawsey, James
Tracey, Richard


Peacock, Mrs Elizabeth
Tredinnick, David


Pickles, Eric
Trend, Michael


Porter, Barry (Wirral S)
Trotter, Neville


Porter, David (Waveney)
Twinn, Dr Ian


Portillo, Rt Hon Michael
Vaughan, Sir Gerard


Powell, William (Corby)
Viggers, Peter


Rathbone, Tim
Waldegrave, Rt Hon William


Redwood, Rt Hon John
Walden, George


Renton, Rt Hon Tim
Walker, Bill (N Tayside)


Richards, Rod
Waller, Gary


Riddick, Graham
Ward, John


Rifkind, Rt Hon Malcolm
Wardle, Charles (Bexhill)


Robathan, Andrew
Waterson, Nigel


Roberts, Rt Hon Sir Wyn
Watts, John


Robertson, Raymond (Ab'd'n S)
Wells, Bowen


Robinson, Mark (Somerton)
Whitney, Ray


Rowe, Andrew (Mid Kent)
Whittingdale, John


Rumbold, Rt Hon Dame Angela
Widdecombe, Ann


Sackville, Tom
Wiggin, Sir Jerry


Sainsbury, Rt Hon Sir Timothy
Wilkinson, John


Scott, Rt Hon Sir Nicholas
Wilshire, David


Shaw, David (Dover)
Winterton, Mrs Ann (Congleton)


Shaw, Sir Giles (Pudsey)
Wolfson, Mark


Shephard, Rt Hon Gillian
Yeo, Tim


Shepherd, Colin (Hereford)
Young, Rt Hon Sir George


Shepherd, Richard (Aldridge)



Shersby, Sir Michael
Tellers for the Ayes:


Sims, Roger
Mr. Timothy Wood and Mr. David Willetts.


Smith, Tim (Beaoonsfield)





NOES


Abbott, Ms Diane
Benn, Rt Hon Tony


Adams, Mrs Irene
Bennett, Andrew F


Ainsworth, Robert (Cov'try NE)
Bermingham, Gerald


Allen, Graham
Berry, Roger


Anderson, Donald (Swansea E)
Betts, Clive


Armstrong, Hilary
Blunkett, David


Austin-Walker, John
Boateng, Paul


Banks, Tony (Newham NW)
Bray, Dr Jeremy


Barnes, Harry
Brown, Gordon (Dunfermline E)


Barron, Kevin
Brown, N (N'c'tle upon Tyne E)


Battle, John
Bruce, Malcolm (Gordon)


Bayley, Hugh
Burden, Richard


Beckett, Rt Hon Margaret
Byers, Stephen


Beith, Rt Hon A J
Caborn, Richard


Bell, Stuart
Callaghan, Jim





Campbell, Mrs Anne (C'bridge)
Hill, Keith (Streatham)


Campbell, Menzies (Fife NE)
Hinchliffe, David


Campbell, Ronnie (Blyth V)
Hodge, Margaret


Campbell-Savours, D N
Hoey, Kate


Cann, Jamie
Hogg, Norman (Cumbernauld)


Carlile, Alexander (Montgomery)
Home Robertson, John


Chidgey, David
Hood, Jimmy


Chisholm, Malcolm
Hoon, Geoffrey


Church, Judith
Howells, Dr. Kim (Pontypridd)


Clapham, Michael
Hoyle, Doug


Clark, Dr David (South Shields)
Hughes, Kevin (Doncaster N)


Clarke, Eric (Midlothian)
Hughes, Robert (Aberdeen N)


Clarke, Tom (Monklands W)
Hughes, Roy (Newport E)


Clwyd, Mrs Ann
Hughes, Simon (Southwark)


Coffey, Ann
Hutton, John


Cohen, Harry
Illsley, Eric


Connarty, Michael
Jackson, Glenda (H'stead)


Cook, Frank (Stockton N)
Jackson, Helen (Shef'ld, H)


Corbett Robin
Jamieson, David


Corbyn, Jeremy
Janner, Greville


Corston, Jean
Jones, Barry (Alyn and D'side)


Cousins, Jim
Jones, Jon Owen (Cardiff C)


Cox, Tom
Jones, Lynne (B'ham S O)


Cummings, John
Jones, Nigel (Cheltenham)


Cunliffe, Lawrence
Jowell, Tessa


Cunningham, Jim (Covy SE)
Keen, Alan


Cunningham, Roseanna
Kennedy, Charles (Ross, C&S)


Dalyell, Tam
Khabra, Piara S


Darling, Alistair
Kilfoyle, Peter


Davidson, Ian
Kirkwood, Archy


Davies, Bryan (Oldham C'tral)
Lestor, Joan (Eccles)


Davies, Rt Hon Denzil (Llanelli)
Lewis, Terry


Davis, Terry (B'ham, H'dge H'l)
Liddell, Mrs Helen


Denham, John
Litherland, Robert


Dewar, Donald
Livingstone, Ken


Dixon, Don
Lloyd, Tony (Stretford)


Dobson, Frank
Llwyd, Elfyn


Donohoe, Brian H
Loyden, Eddie


Dunwoody, Mrs Gwyneth
Lynne, Ms Liz


Eagle, Ms Angela
McAllion, John


Eastham, Ken
McAvoy, Thomas


Etherington, Bill
Macdonald, Calum


Evans, John (St Helens N)
McFall, John


Ewing, Mrs Margaret
Mackinlay, Andrew


Fatchett, Derek
McLeish, Henry


Faulds, Andrew
Maclennan, Robert


Field, Frank (Birkenhead)
McMaster, Gordon


Fisher, Mark
McWilliam, John


Flynn, Paul
Madden, Max


Foster, Rt Hon Derek
Maddock, Diana


Foster, Don (Bath)
Mahon, Alice


Fraser, John
Marek, Dr John


Fyfe, Maria
Marshall, Jim (Leicester, S)


Gapes, Mike
Martin, Michael J (Springburn)


Garrett, John
Martlew, Eric


George, Bruce
Maxton, John


Garrard, Neil
Meacher, Michael


Gilbert, Rt Hon Dr John
Meale, Alan


Godman, Dr Norman A
Michael, Alun


Godsiff, Roger
Michie, Bill (Sheffield Heeley)


Golding, Mrs Llin
Milburn, Alan


Gordon, Mildred
Miller, Andrew


Graham, Thomas
Mitchell, Austin (Gt Grimsby)


Grant, Bernie (Tottenham)
Morgan, Rhodri


Griffiths, Nigel (Edinburgh S)
Morley, Elliot


Griffiths, Win (Bridgend)
Morris, Rt Hon Alfred (Wy'nshawe)


Grocott, Bruce
Morris, Estelle (B'ham Yardley)


Gunnell, John
Morris, Rt Hon John (Aberavon)


Hain, Peter
Mowlam, Marjorie


Hall, Mike
Mudie, George


Hanson, David
Mullin, Chris


Hardy, Peter
Murphy, Paul


Harvey, Nick
Oakes, Rt Hon Gordon


Hattersley, Rt Hon Roy
O'Brien, Mike (N W'kshire)


Henderson, Doug
O'Brien, William (Normanton)


Heppell, John
O'Hara, Edward






Olner, Bill
Smith, Andrew (Oxford E)


O'Neill, Martin
Smith, Chris (Isl'ton S & F'sbury)


Orme, Rt Hon Stanley
Smith, Llew (Blaenau Gwent)


Parry, Robert
Spearing, Nigel


Pearson, Ian
Spellar, John


Pendry, Tom
Steel, Rt Hon Sir David


Pickthall, Colin
Stevenson, George


Pike, Peter L
Strang, Dr. Gavin


Pope, Greg
Straw, Jack


Powell, Ray (Ogmore)
Sutcliffe, Gerry


Prentice, Gordon (Pendle)
Taylor, Mrs Ann (Dewsbury)


Prescott, Rt Hon John
Taylor, Matthew (Truro)


Primarolo, Dawn
Thompson, Jack (Wansbeck)


Purchase, Ken
Timms, Stephen


Quin, Ms Joyce
Touhig, Don


Radice, Giles
Tyler, Paul


Randall, Stuart
Vaz, Keith


Raynsford, Nick
Walker, Rt Hon Sir Harold


Reid, Dr John
Wallace, James


Rendel, David
Walley, Joan



Wardell, Gareth (Gower)


Robertson, George (Hamilton)
Wareing, Robert N


Robinson, Geoffrey (Co'try NW)
Watson, Mike


Roche, Mrs Barbara
Wicks, Malcolm


Rogers, Allan
Williams, Rt Hon Alan (Sw'n W)


Rooker, Jeff
Williams, Alan W (Carmarthen)


Rooney, Terry
Wilson, Brian


Ross, Ernie (Dundee W)
Winnick, David


Rowlands, Ted
Wise, Audrey


Salmond, Alex
Worthington, Tony


Sedgemore, Brian
Wray, Jimmy


Sheerman, Barry
Wright, Dr Tony


Sheldon, Rt Hon Robert
Young, David (Bolton SE)


Shore, Rt Hon Peter



Short, Clare
Tellers for the Noes:


Simpson, Alan
Mr. Joe Benton and Mr. Jim Dowd.


Skinner, Dennis

Question accordingly agreed to.

Resolved,
That this House welcomes the publication of the Government's latest forecast, which shows growth continuing at a steady and sustainable rate, inflation remaining low, exports rising and Government borrowing falling; and recognises that this favourable outlook for the economy is a result of the Government's firm commitment to the healthy and sustainable recovery of a modern and competitive industrial economy.

Immigration Service (Hackney Council)

Motion made, and Question proposed, That this House do now adjourn.— [Mr. Wells.]

Mr. Brian Sedgemore: Hackney has had its share of troubles in the past, but in recent years it has become a well-managed council, which attracts large amounts of Government money. It has more than 11,000 employees, the overwhelming majority of whom are loyal and hard-working public servants.
When there is fraud, Hackney tries to root it out seriously. Since 1990, 110 council staff have been sacked or have left when disciplinary action loomed. The council has helped the police successfully to prosecute 24 of those. The council's approach to combating fraud has been praised by the district auditor for four years, and by the police, with whom the council has an excellent relationship. It co-operated with outside bodies, but only within the rule of law. That is where the trouble starts— operations outside the rule of law.
The council was shocked to discover that, earlier this year, a Ms Jill Arnfield of the immigration and nationality department of the immigration service had in her possession a list of 600 Hackney council employees. The information was not supplied by Hackney council but was removed without authorisation from the council's payroll records. Ms Arnfield used the stolen list to run systematic checks on people of whom there was no suspicion of wrongdoing. She then passed the list to a Ms Jenny Gray of the Benefits Agency to run further blanket checks.
When Ms Arnfield handed over the list, she said, according to Jenny Gray, that she had got it officially from Hackney council. That was a lie. She asked Jenny Gray not to tell her line manager that she had the list. However, Jenny Gray told a David Carroll, her line manager, who reported the matter to Hackney council.
The list contained 600 African names, and gave their payroll numbers and their start and leaving dates. It is clear as clear can be from the list—I have here one of the pages from that list—that it has come off a computer, and that its use was in breach of the Data Protection Act 1984. It is my belief that the IND has colluded in a criminal act and has been an accessory after the fact of a crime, which in itself is a crime.
It is clear that whoever supplied the information to the IND did so with the sole aim of encouraging it to investigate all of Hackney council's African employees. That is a gross and despicable violation of the civil liberties of the individuals concerned. They should be investigated only where the IND has grounds for reasonable suspicion against them as individuals, and not because their name appears on a general list. It is a nasty form of racism, which has caused deep offence in Hackney council.
One remembers that, in Germany in the inter-war years, the secret police checked up on Jews merely by virtue of the fact that they were Jews. In Hackney in 1995, a secret police has been checking up on Africans who work for Hackney council merely by virtue of the fact that they are of African descent.
On 10 March, Robert Barr, the assistant chief finance officer, met members of the Immigration and Nationality Department to complain. His confidential minute of the same date records:
Following the revelation of the list of names the IND officers appeared to be very uncomfortable.
The meeting came to an abrupt end. Now, two Government Departments are refusing to co-operate in an inquiry into crime and one of them—bizarrely—is the Home Office, which is responsible for law and order.
On 11 May 1995, David Wilson, a Home Office official from the IND, wrote to Hackney council:
On balance we feel that it would be inappropriate for Ms Arnfield to be drawn into your enquiry and that she should not be directly interviewed as part of your investigation. However, should you wish to direct any written enquiries to me at the above address, we will do our best to provide you with answers.
That is a slippery way out of a difficult situation.
On 2 June 1995, P. Gisbey from the Benefits Agency wrote to Hackney council saying:
In your letter you asked to the Agency's agreement for our officer, … Jenny Gray, to be interviewed by you concerning this matter. I have sought advice from our Personnel Command concerning this, and they inform me that it would be inappropriate for this to happen unless it were part of court proceedings and a subpoena issued.
I am a barrister, but perhaps the Minister can tell me and the House how there can be court proceedings and a subpoena issued when the chief witness in the case will not make a statement to the people inquiring into the case—wrap your mind around that, Minister.
I seek three assurances from the Minister. First, will he assure me that Ms Arnfield will co-operate with the inquiry that has now been set up by the Data Protection Registrar, Elizabeth France; secondly, that Ms Arnfield will, with the Home Office's permission, co-operate with any police inquiry; and thirdly, that there will be no issue of public immunity certificates or other devices to protect the staff of the IND?
Moreover, we are not dealing with only one list—there have been others. I have here a copy of a letter dated 17 February 1995 and signed by a Mr. Barrett, assistant director of the IND of the immigration service. It states:
It is not possible at this stage for my staff to recall which member of Hackney Council's Tenancy Audit Team asked for the checks to be carried out about 18 months ago and I understand that none of the lists"—
in the plural—
were retained after the checks were completed.
Perhaps the Minister will tell us about the other lists of people being investigated.
Shortly before the story broke in The Observer, a journalist went to see Hackney's disgraced and sacked director of housing, Mr. Bernard Crofton, because it was his tenancy audit team and he who had released the information. Mr. Crofton admitted to the journalist that he personally had supplied a list of 300 Hackney council employees to the IND.
He then made the following bizarre suggestion about the list of the 600 African names: he said that Robert Barr, the assistant chief finance officer, had made available to the Benefits Agency details of all 11,000 of Hackney council's employees, that the Benefits Agency had passed them to the IND, and that the IND had then extracted the 600 African names and passed the list back to the Benefits Agency. It is a wonderful story, but it is wholly untrue.
The House will remember that it was Mr. Robert Barr who, on 10 March, went to the Home Office to complain about the original list, but he is now being accused of being the person who provided it. Thanks to me, it is being made known to Mr. Barr what Mr. Crofton has said. If Mr. Crofton makes a statement in public, he will receive a libel writ. However, Mr. Crofton seems to have dropped this particular potty story and gone in another direction.
We have been able to catch Mr. Crofton out in this particular case because he could not have known that I would be told by the journalist exactly what he said. I can hear daft mutterings from above me even as I speak.
A couple of weeks ago, I was going through a long list of documents, and suddenly I was gobsmacked. I found that the suspended director of housing had had a meeting with the Immigration and Nationality Department on 31 October 1994. I wondered why. The Under-Secretary of State who is to reply to this debate, said in answer to my question:
Following the suspension of Mr. Crofton from his post of director of housing at Hackney council, Mr. Ostler"—
the head of the tenancy audit team—
sought a meeting."— [Official Report, 3 July 1995; Vol. 263, c. 27. ]
I can tell the Minister that his answer is not true. How can I be certain that his answer is not true? It is because I have a letter from Mr. Barrett, the assistant director of the IND, written to the chief executive of Hackney council, dated 20 December 1994, which says:
Turning to the meeting on the 31 October at Becket House, I understand"—
presumably referring to the civil servant who briefed the Minister on his untrue answer—
that this was arranged at Mr. Crofton's request and was purely a general discussion, with no record of the meeting having taken place.
We have to give accurate answers to parliamentary questions, yet the Home Office civil servant tells me in this letter that we have been given an inaccurate answer. No doubt the Minister will wish to make a statement on that tomorrow.
The plot thickens, because Mr. Crofton has a third account of this meeting. He issued a press release, or a press release was issued on his behalf, last week, which said:
However, the facts are that the Home Office requested the meeting because of its concerns about publicity following Mr. Crofton's suspension by Hackney council.
First Mr. Ostler was supposed to have sought a meeting, then Mr. Crofton, and then the Home Office.
I discovered over the weekend that, when Mr. Crofton was questioned about the matter, he said that he was telephoned by the immigration service at his home—when he was suspended—and told about the meeting. What a wonderful intimate relationship! The suspended director of housing on Hackney council was telephoned at his home for a meeting of which no minute was taken.
Mr. Crofton goes on:
The meeting was informal but not secret or unauthorised. Mr. Crofton informed former Chief Executive, Jerry White, of the meeting, and also submitted correspondence to a Council committee confirming the discussion which took place at the meeting.
That is fine—a perfectly rational explanation. Mr. Crofton is in the clear. The only problem is that, when one cross-checks the document and talks to the witnesses, one discovers a web, a tissue, of lies. Every statement that I have just read out is a blatant and deliberate lie.
The chief executive that we are talking about is now a local government ombudsman—not somebody that one can slag off with impunity. He has confirmed to me that he knew nothing about this meeting, it was totally unauthorised, and he found out about it three weeks later via a third person who refused to attend the meeting precisely because Mr. Crofton was unauthorised and should not have attended the meeting. As for that nonsense about Mr. Crofton reporting it to a committee, Mr. Crofton simply had to report it to the disciplinary panel that was hearing his case. This is the close and intimate friend of the Home Office who is trampling on the civil rights of Hackney's workers.
Then, as if that is not enough for the Minister to answer, the Immigration and Nationality Department has run a dirty tricks campaign, leaking information and misinformation to various journalists supplied by—guess who? First, there is the case of Tim Kelsey of The Independent. He leaked some stuff which was given to him by the IND, and there was a row over whether he should say that the investigation was understood to be based on evidence produced by Bernard Crofton. But Mr. Kelsey stuck to his guns and put it in the paper, and that upset Mr. Crofton.
Then, there was a most recent case. One journalist was given the names of two teachers by the IND and told that they were going to be picked up and deported before their interview with the asylum section on 31 May 1995. There are people in this country who believe that it is not natural justice for the IND to announce that somebody is going to be deported before they have even had their hearing. That does not sound right to me, as a barrister.
The journalist insists that the story, which appeared in the Daily Mail, came from the Home Office. The Home Office does not want to comment on it. The Minister gave me some facts in a parliamentary answer, but I read about them in The Guardian the day before the Minister gave them to me. They had been leaked by the Immigration and Nationality Department.
I could name case after case in which, for whatever reason, the department has sought to destroy the reputation of Hackney council in a disgraceful fashion. Why did someone in Hackney housing department appear to be an arm of the Immigration and Nationality Department? I shall tell you why, Madam Deputy Speaker.
There have been two small groups that constitute two little secret police forces. One—the tenancy audit team, led by Mr. Crofton—comes from Hackney council. Those people have gone potty. If I were to sum up Mr. Crofton, I should say that he is a highly sophisticated liar, that he is deluded, and that, using words in their ordinary and natural meaning, he is a racist. Secondly, for whatever reason, a small group of people in the IND have been using Mr. Crofton.
Mr. Crofton has constructed a world in which "west African" equals "illegal immigrant" equals "fraudster". That equation has buzzed around in his mind until he has blown it, because the equation is not true, and he has not been able to make it stack up. Now, hardly any decent people I know support him—apart from a poisonous little fat boy called Keith Vaness, who is out of his depth, and a few oddballs who have backed Mr. Crofton down the years. [Interruption.]
I hear the derisive cheers from the anti-civil libertarians on the Government Benches, but I tell the Minister that the whole business has constituted a disgraceful and shameful act. Hackney council should dissociate itself from the IND immediately, and re-establish a completely new line.

The Parliamentary Under-Secretary of State for the Home Department (Mr. Nicholas Baker): The hon. Member for Hackney, South and Shoreditch (Mr. Sedgemore) has been most persistent in his attempts to suggest to the House that there is something sinister or improper in the way in which the Immigration and Nationality Department has conducted its affairs with the London borough of Hackney. He has now tabled eight parliamentary questions and three notices of motions.
The hon. Gentleman has also levelled accusations against officials from the Immigration and Nationality Department that are absurd and have absolutely no basis in fact—in fact, I challenge the hon. Gentleman to repeat some of what he has said this evening outside the House—so I especially welcome the opportunity to reject the accusations and to put the record straight.
I am also pleased to have the opportunity to set out serious concerns about three factors. The first is the recruitment policies of Hackney council; the second is the lack of proper checks, which has led to an unsatisfactory situation in which a high number of immigration offenders are thought to be employed by the council; and the third is the lack of co-operation by the council with the immigration service in dealing with apparent abuse of the immigration laws.
The hon. Gentleman has accused the Home Office of a witch hunt. There is none; nor has there ever been a witch hunt by Home Office officials against employees of Hackney council. But where there are apparent abuses of the immigration laws, the immigration service has a duty to investigate them. Eight employees of Hackney council have already been identified as immigration offenders, and served either with papers as illegal entrants or with notices of intention to deport.
The hon. Gentleman accuses Home Office officials of complicity in the theft of a computer disk. I say clearly that the Home Office is not, and never has been, in possession of a computer disk containing details of employees of Hackney council.
He accuses the Home Office of collusion in unlawful and criminal acts. There has been no such collusion. If the council's security procedures have been breached, it is for council officials to pursue the matter with the police, and with the Data Protection Registrar, if appropriate.
The evidence I shall lay before the House tonight will show conclusively that the immigration service has acted properly and with considerable restraint. It has operated in an open manner, offering to co-operate with the council to resolve the matters—an offer which the council has not accepted.
The hon. Gentleman must surely realise that all is not well in the "House of Hackney", and that the lawful activities of the immigration service cannot be used by Hackney council as a smokescreen to cover its own internal difficulties. It is time for the council to stop name-calling—and time for the hon. Gentleman to do the same—and to wake up to its responsibilities. These wild


allegations can only serve to lessen the electorate's view of local government in London, and reflect poorly on the Labour party.
For some time now, the immigration service has received a stream of allegations from different sources alleging that illegal entrants were being employed by Hackney council. Not all the allegations were researched, but only those where there was evidence to suggest that the information was accurate.
The immigration service enforcement directorate is required to investigate allegations and information from whatever source about persons who may be working and/or residing in this country illegally. Such inquiries are not limited to cases of people of African origin or who are black. They are carried out irrespective of the nationality or race of the person concerned, and are based only on the question whether there are reasonable grounds for believing that offences under the immigration laws are being committed.
I have said that a number of immigration offenders working for the council have already been identified. Allow me to give some examples of the lax procedures of the council which enabled these offenders to obtain employment. The hon. Gentleman may then care to reflect on whether he wishes to see the law enforced or not.
On 2 September 1994, the immigration service detained a 35-year-old female who was employed by the London borough of Hackney as a cook. She had overstayed her leave to enter the United Kingdom since 23 October 1992. She had no permission to live or work in this country.
On 1 December 1994, a 33-year-old male was detained by the immigration service for working in breach of his conditions of entry. He had been employed on a full-time basis by the London borough of Hackney since June 1990, most recently as an estate manager for the housing department. [Interruption.] I can tell the hon. Gentleman that all his hon. Friends are leaving him, and he is becoming increasingly isolated.
In February 1995, a 36-year-old male was served with a notice of illegal entry. He had entered the United Kingdom using a false British passport. He was employed by the London borough of Hackney as a full-time personnel officer in the chief executive's office. He had been using a false identity, that of a teenage girl. He had been employed using the girl's national insurance number, which gave her true date of birth. He gave a different date of birth to the council, and used the girl's name to obtain employment. These discrepancies went unnoticed. He was removed from the United Kingdom on 20 February this year.
On 26 February 1995, a 24-year-old female was served with a notice of illegal entry. She had entered the United Kingdom on 27 November 1992. She had claimed to be coming for a visit of three days. She concealed the existence of her husband, who was already in the United Kingdom, and obtained employment with the London borough of Hackney as a full-time finance officer.
The list goes on, but I shall abbreviate it. All those cases give clear cause for concern and raise serious questions about the procedures employed by Hackney council in the recruitment of its staff. There are other cases.
The immigration service wrote to the chief executive of Hackney council on 25 January asking for a check to be made on two employees. The chief executive admitted in his reply, dated 13 February 1995, that the two

employees had not confirmed in their application forms that they required a work permit to work in the United Kingdom, or that they were prohibited from taking employment by the conditions of their stay here. The two individuals were dismissed before the immigration service was given the opportunity to establish their status in this country, and as yet they have not been found.
The hon. Gentleman has mentioned a list of 600 employees, which he believes was obtained by the immigration service unlawfully. The immigration service received two manuscript lists containing what appeared to be details of persons employed by Hackney council. They were unsolicited. One was received in December 1994, the other in February 1995.
They were not extracts from a computer payroll record, and contained no sign that they had originated from within the council. The immigration service cannot be held responsible for the fact that they contained names almost exclusively of African origin; nor is it for me to comment on the motives of the person or persons who supplied the lists.
The hon. Gentleman has accused the Home Office of refusing to co-operate fully in an investigation to establish whether the Data Protection Act 1988 had been breached. He has also suggested that the information was unlawfully provided to the Home Office by the supporters of Mr. Bernard Crofton, the housing director of Hackney council, who is currently under suspension.
He notes that the associates of Mr. Crofton have now shown themselves in their true colours. In the motion dated 22 June 1995 the hon. Gentleman says that they have shown themselves
to be barmy, racist and criminal in character".

Mr. Jeremy Corbyn: Will the Minister give way?

Mr. Baker: The hon. Gentleman will forgive me, but I am very short of time. I have many points that I wish to put to the hon. Member for Hackney, South and Shoreditch, and I am sorry that, on this occasion, I cannot give way as I would normally like to do.
I understand that the data protection registrar has been asked to conduct an inquiry into possible breaches of the Data Protection Act. It would therefore be wrong for me to comment in further detail, but the Home Office will, of course, co-operate fully with any such inquiry. What I shall say is that all information alleging breaches of the immigration laws is thoroughly researched, both within the Department and with other agencies, where an abuse of public funds is suspected.
The Government are committed to firm but fair immigration control, and will continue to welcome genuine visitors to our shores. But when overseas nationals abuse the immigration laws, they must expect to be dealt with firmly and returned to their own countries. Those who flout the immigration laws cannot expect to evade investigation simply by the status of their employer or the nature of their employment.
The immigration service receives denunciatory information from many sources. It would be inappropriate to reveal publicly the source of the information. The London borough of Hackney requested an interview with the immigration officer involved in many of the


investigations that I have outlined today, in order—the hon. Gentleman will confirm this—to ask her from whom or where her information was coming.
The general question of such disclosure is a matter for the Home Office, not for individual immigration officers. For that reason, the Home Office offered to respond to any written inquiries but not to allow individual immigration officers to be interviewed about matters that go beyond their responsibilities. The council has not taken up that offer of co-operation.
The Home Office has never received information from Mr. Crofton. The hon. Gentleman will know that, in 1993, Mr. Crofton established his tenancy audit team, consisting of members recruited from outside the authority, to investigate allegations of widespread corruption in the housing department of Hackney council. The council's own appointed team found evidence that many council properties were inhabited by people who had no right to live in them and who in some cases had no right to be in the United Kingdom.
The team asked the immigration service to co-operate with its investigation into the misuse of council property, which has led to the apprehension of a number of immigration offenders and the return of several properties to the council—properties that it was then able to reallocate to genuine applicants. The immigration service will continue to investigate any breaches of the immigration laws if asked to do so by the tenancy team.
The immigration service has sought the council's co-operation to try to resolve this matter sensibly. It has pointed out the judgment in the Court of Appeal case of the Queen v. the Secretary of State for the Environment, ex parte London borough of Tower Hamlets, which

concerned the duties of local housing authorities under the homelessness provisions. I draw the hon. Gentleman's attention to that case.
That judgment confirmed that not only was there no bar to local authorities telling the Immigration and Nationality Department if they came across a suspected immigration offender; rather, it was their duty to do so.
Guidance following the judgment issued by the Department of the Environment in February 1994 recommended that local authorities should register a point of contact with the Immigration and Nationality Department for the handling of all inquiries by an authority. Although Hackney council has registered its benefit staff for the purposes of exchanging information on persons claiming housing benefit or council tax benefit, it has yet to register a contact point in accordance with that guidance.
The immigration service has also met council officials to discuss improvements in its recruitment procedures. It can surely only be to the benefit of people who are legally here that those who are not should be readily identifiable if they seek work.
The evidence that I have laid before the House tonight should give the hon. Gentleman cause to cease his bluff and think again. I urge him to retract his baseless allegations. I am satisfied that the immigration service has acted reasonably and with considerable restraint in its dealings with the London borough of Hackney. The council does not appear to have acted in a spirit of true co-operation—

The motion having been made after Ten o'clock, and the debate having continued for half an hour, MADAM DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned accordingly at Eleven o 'clock.